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The long-run effects of government spending on structural change: Evidence from Second World War defense contracts

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  • Li, Zhimin
  • Koustas, Dmitri

Abstract

This paper studies the long-run effects of the largest government spending program in U.S. history – Second World War defense spending – on structural change in local economies. We link a dataset of war supply contracts with economic data at the county level spanning from 1930 to 2000. Using counties that received no defense spending as a comparison group and controlling for prewar characteristics, we find that wartime defense spending led to sustained reallocation of labor to manufacturing and other non-agricultural sectors in war production centers, contributing to the long-term population growth in those regions.

Suggested Citation

  • Li, Zhimin & Koustas, Dmitri, 2019. "The long-run effects of government spending on structural change: Evidence from Second World War defense contracts," Economics Letters, Elsevier, vol. 178(C), pages 66-69.
    • Handle: RePEc:eee:ecolet:v:178:y:2019:i:c:p:66-69
    DOI: 10.1016/j.econlet.2019.02.012
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    References listed on IDEAS

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    1. Enrico Moretti, 2014. "Local Economic Development, Agglomeration Economies, and the Big Push: 100 Years of Evidence from the Tennessee Valley Authority," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 275-331.
    2. Price V. Fishback & Taylor Jaworski, 2016. "World War II and US Economic Performance," Studies in Economic History, in: Jari Eloranta & Eric Golson & Andrei Markevich & Nikolaus Wolf (ed.), Economic History of Warfare and State Formation, pages 221-241, Springer.
    3. Price Fishback & Joseph A. Cullen, 2013. "Second World War spending and local economic activity in US counties, 1939–58," Economic History Review, Economic History Society, vol. 66(4), pages 975-992, November.
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    More about this item

    Keywords

    Second World War; Structural change; Place-based policy;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • N92 - Economic History - - Regional and Urban History - - - U.S.; Canada: 1913-
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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