Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans' Bonus | Zendy

Joshua K. Hausman | Zendy

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Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans' Bonus

Author(s) -

Joshua K. Hausman

Publication year - 2016

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.20130957

Subject(s) - economics , consumption (sociology) , per capita , fiscal policy , payment , point (geometry) , work (physics) , fiscal year , per capita income , demographic economics , macroeconomics , finance , medicine , population , mechanical engineering , social science , mathematics , sociology , engineering , geometry , environmental health , pathology

Conventional wisdom has it that in the 1930s fiscal policy did not work because it was not tried. This paper shows that fiscal policy was tried in 1936. The veterans' bonus of 1936 paid 2 percent of GDP to 3.2 million veterans; the typical veteran received a payment equal to per capita income. Multiple sources, including a household consumption survey, show that veterans spent the majority of their bonus. Point estimates of the MPC are between 0.6 and 0.75. Spending was concentrated on cars and housing in particular. (JEL E21, E32, E62, N32, N42)

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