Price V. Fishback, Michael R. Haines, and Shawn Kantor
Fishback is Frank and Clara Kramer Professor of Economics at the University of Arizona; Haines is Banfi Vintners Distinguished Professor of Economics at Colgate University; and Kantor is Professor of Economics at the University of California at Merced. All three authors are Research Associates of the National Bureau of Economic Research. We thank Lee Alston, Martha Bailey, Howard Bodenhorn, Susan Carter, Mark Duggan, Alfonso Flores-Lagunes, Michael Greenstone, James Heckman, William Horrace, Lars Lefgren, Gary Libecap, Robert Margo, Derek Neal, Arden Pope, Richard Steckel, Melissa Thomasson, John Wallis, and two anonymous referees for helpful comments. We have also benefited from the comments of seminar participants at Brigham Young University, University of California, Davis, University of Chicago, and Keio University, University of Massachusetts at Amherst, and conference participants at the All-UC Economic History Conference in November 2004. Fishback and Kantor’s work on this paper was supported by National Science Foundation Grant Numbers SBR-9708098, SES-0080324, and SES-0214395. Any opinions stated here are the authors’ and not those of the National Science Foundation.
ABSTRACT Births, Deaths, and New Deal Relief during the Great Depression This paper examines the impact of New Deal relief programs on infant mortality, noninfant mortality and general fertility rates in major U.S. cities between 1929 and 1940. We estimate the effects using a variety of specifications and techniques for a panel of 114 cities for which data on relief spending during the 1930s were available. The significant rise in relief spending during the New Deal contributed to reductions in infant mortality, suicide rates, and some other causes of death, while contributing to increases in the general fertility rate. Estimates of the relationship between economic activity and death rates suggest that many types of death rates were pro-cyclical, similar to Ruhm’s (2000) findings for the modern U.S.. Estimates of the relief costs associated with saving a life (adjusted for inflation) are similar to estimates found in studies of modern social insurance programs.
JEL Classifications: I38, J11, N32
Births, Deaths, and New Deal Relief during the Great Depression I. Introduction
How well do social welfare programs mitigate the effect of economic disasters on demographic outcomes? To answer this question, we examine the effect of New Deal relief programs on fertility, infant deaths, noninfant deaths, suicides, homicides, and other causes of death during the Great Depression. During the 1930s Americans experienced an economic disaster that lasted an entire decade. Unemployment rates peaked at well over 20 percent of the labor force and real GNP fell by roughly one-third between 1929 and 1933. Real GNP did not reach its 1929 level again until the end of the decade and the unemployment rate remained over 10 percent throughout the decade. The numbers do not reveal the full devastation experienced during the 1930s, as many people stood in bread lines, lost their homes, their jobs, and their hope for the future. Such a dramatic economic shock was likely to contribute to substantial shifts in demographic outcomes. The sharp reductions in income and consequent inadequate access to nutrition, housing and medical care put infants and people of all ages at greater risk of death and disease. Economic problems potentially fueled psychological depression that contributed to more suicides and social and economic stresses that led to more homicides. Meanwhile, the greater uncertainty about the future led many families to delay child-bearing.
To combat the Depression, the federal government expanded its social welfare spending in a dramatic and unprecedented fashion. As the economy slid toward the trough of the Depression in the early 1930s, the burden of providing relief rested on state and local governments and private charitable organizations. As the lower levels of government were overwhelmed by the scope of the problem, the Hoover administration provided loans through the Reconstruction Finance Corporation so that state and local governments could fund relief in the latter part of 1932. Per capita relief spending rose from $3.90 in 1930 to $18.70 in 1932 (constant 1967 dollars). It was Roosevelt’s New Deal, however, that revolutionized welfare spending both in the short term and the long term. The federal government poured resources (sometimes in partnership with state and local governments) into the provision of emergency work relief and direct relief during the First New Deal (1933-1935). After 1935 through the beginning of World War II, the federal government continued providing emergency work relief. Under the Social Security Act enacted in 1935, the Roosevelt administration established a federal/state/local partnership to provide public assistance to dependent children, the blind, and the aged that replaced the much smaller state and local programs that had existed prior to the New Deal. Federal involvement in relief efforts led to dramatic increases in spending, as per capita relief expenditures increased by about 160 percent between 1932 and 1933. By 1940 per capita relief expenditures were almost three times the 1932 level even though the unemployment rates were substantially below the 1932 level.
One way to measure the success of these programs is to examine how they influenced demographic outcomes. Economists have become increasingly interested in using a broad range of demographic measures, in addition to income, to determine economic welfare. Infant mortality rates, for example, have been incorporated in alternative assessments of well-being that supplement comparisons of real per capita GDP across countries.1In many situations, including the 1930s in America, we cannot obtain good estimates of the incomes of the poor. Meanwhile, numerous studies show that mortality rates and fertility are strongly associated with socioeconomic status, broadly defined.2 Because the relief programs of the New Deal – and welfare programs more generally – were designed to help people in the lower tail of the income distribution, fertility and mortality rates can serve as important indicators of the programs’ effectiveness.
Studies of modern U.S. data can give us only limited guidance as to the impact of major Depressions. Christopher Ruhm’s (2000) study of the U.S. from 1972 to 1991 finds that mortality rates tend to fall during downturns, but the period he examines does not include downturns of the scale of the Great Depression, and studies of other times and places do not find such a pro-cyclical relationship. Meanwhile, a growing body of research has explored the impact of various modern social programs on the health and development of children.3 Focusing on relatively recent expansions in various programs’ benefits or the cross-state differences in these benefits, the research has produced a mixed assessment of the effectiveness of modern public assistance. The modern debates over the effect of welfare benefits on fertility have focused in particular on teen pregnancies and out-of-wedlock births in an economic environment with relatively mild fluctuations (Haveman and Wolfe 1994, ch. 6; Blank 1995; Mellor 1998; Grogger and Bronars 2001; Schultz 1994). The Depression of the 1930s was so harsh and the introduction of large scale federal spending so new that the effect of social welfare spending was more likely to have encouraged marriage and married couples to return to more normal fertility patterns.
To analyze the impact of the relief programs, we developed a new panel data set that enables us to measure the relationships between relief spending and birth and death rates in 114 cities annually from 1929 through 1940. The U.S. Children’s Bureau published annual information on public assistance for 1929 through 1935 (Winslow 1937) and the U.S. Social Security Board updated the series and carried the data forward through 1940 (Baird 1942). To this rich data set on relief spending, we then matched information on demographic outcomes in the cities, as well as socioeconomic variables (see the Data Appendix for details). Thus, the data that we have assembled not only captures the dramatic increase in relief spending that accompanied the New Deal’s introduction in the early 1930s, but it also allows us to measure the effectiveness of the relief spending at a relatively low level of aggregation. Analysis of the data using fixed effects to control for heterogeneity and instrumental variables to control for endogeneity suggest that the New Deal relief programs had a substantial influence on demographic outcomes during the 1930s. Greater spending was associated with lower infant mortality, lower suicide rates, fewer deaths from diarrhea and infectious diseases, and higher birth rates. The New Deal relief programs essentially helped contribute to returning society toward more normal demographic patterns in the heart of the worst Depression in American history.