Shawn Kantor

The Effect of Internal Migration on Local Labor Markets:American Cities during the Great Depression

The Great Depression offers a unique laboratory to investigate the causal impact of migration on local labor markets. We use variation in the generosity of New Deal programs and extreme weather events to instrument for migrant flows to and from U.S. cities. In-migration had little effect on the hourly earnings of existing residents. Instead, in-migration prompted some residents to move away and others to lose weeks of work or access to relief jobs. For every 10 arrivals, we estimate that 1.9 residents moved out, 2.1 were prevented from finding a relief job, and 1.9 shifted from full-time to part-time work.

The Adoption of Workers' Compensation in the United States 1900-1930

Workers compensation was established by a coalition of workers, employers, and insurers who anticipated gains from replacing negligence liability. Employers anticipated reduced uncertainty and administration costs and were able to pass some of the costs of workers compensation benefits on to workers through lower wages. The average worker anticipated higher postaccident benefits. Even if lower wages meant they “bought” better benefits, they anticipated better “insurance” of accident risk. Insurers expected to expand their coverage of workplace accidents. Legislative action was required because the courts did not recognize private contracts in which workers waived their rights to negligence suits prior to an accident. Changes in employers liability served as the catalyst uniting the groups in support of the legislation. Workers compensation was adopted earlier in states where employers liability costs were increasing more, unions were stronger, plant sizes were larger, and to some extent where the Progressive movement was stronger.

Did New Deal Grant Programs Stimulate Local Economies? A Study of Federal Grants and Retail Sales During the Great Depression

Using data on New Deal grants to each U.S. county from 1933 to 1939, we estimate how relief and public works spending and payments to farmers through the Agricultural Adjustment Administration influenced retail consumption. On a per capita basis, we find that an additional dollar of public works and relief spending was associated with a 44 cent increase in 1939 retail sales. In contrast, the AAA seems to have had a negative effect on retail sales, suggesting that nonlandowners in the farm sector suffered disproportionate declines in income as a result of the AAA.

Precautionary Saving, Insurance, and the Origins of Workers' Compensation

In this article we test whether the introduction of social insurance has led to a reduction in private insurance purchases and precautionary saving by examining the introduction of workers compensation. Our empirical analysis is based on the financial decisions of over 7,000 households surveyed for the 1917-19 Bureau of Labor Statistics Cost-of-Living study. We find that the presence of workers compensation at least partially crowded out private accident insurance and led to a substantial reduction in precautionary saving. The introduction of workers compensation caused private saving to fall by approximately 25 percent, with other factors held constant.

Did Workers Pay for the Passage of Workers' Compensation Laws?

Market responses to legislative reforms often mitigate the expected gains that reformers promise in legislation. Contemporaries hailed workers compensation as a boon to workers because it raised the amount of post-accident compensation paid to injured workers. Despite the large gains to workers, employers often supported the legislation. Analysis of several wage samples from the early 1900s shows that employers were able to pass a significant part of the added costs of higher post-accident compensation onto some workers in the form of reductions in wages. The size of the wage offsets, however, were smaller for union workers.

Striking at the Roots of Crime: The Impact of Welfare Spending on Crime During the Great Depression

During the Great Depression contemporaries worried that people hit by hard times would resort to crime. President Franklin Roosevelt argued that the massive government relief efforts “struck at the roots of crime” by providing subsistence income to needy families. After constructing a panel data set for 81 large American cities for the years 1930–40, we estimate the effect of relief spending by all levels of government on crime rates. The analysis suggests that a 10 percent increase in relief spending during the 1930s reduced property crime by roughly 1.5 percent. By limiting the amount of relief recipients’ free time, work relief may have been more effective than direct relief in reducing crime. More generally, our results indicate that social insurance, which tends to be understudied in economic analyses of crime, should be more explicitly and more carefully incorporated into the analysis of temporal and spatial variations in criminal activity.

Knowledge Spillovers from Research Universities: Evidence from Endowment Value Shocks

We estimate the local spillovers from research university activity in a sample of urban counties. Our approach uses the interaction between university endowment values and stock market shocks over time for identification. We find statistically significant local spillover effects from university activity. The effects are significantly larger when local universities are more research intensive or local firms are technologically close to universities. Our results suggest that the longer-term effects that universities have on their local economies may grow over time as the composition of local industries adjusts to take advantage of the heterogeneous knowledge spillovers we identify.

The Dynamics of Relief Spending and the Private Urban Labor Market During the New Deal

During the New Deal the Roosevelt Administration dramatically expanded relief spending to combat extraordinarily high rates of unemployment. We examine the dynamic relationships between relief spending and local private labor markets using a new panel data set of monthly relief, private employment and private earnings for major U.S. cities in the 1930s. Impulse response functions derived from a panel VAR model that controls for time and city fixed effects show that a work relief shock in period t-1 led to a decline in private employment and a rise in private monthly earnings. The finding offers evidence consistent with contemporary employers complaints that work relief made it more difficult to hire, even though work relief officials followed their stated policies to avoid affecting private labor markets directly. Meanwhile, negative shocks to private employment led to increases in work relief, consistent with Roosevelts stated goal of using relief to promote relief and recovery.

Research Proximity and Productivity: Long-Term Evidence from Agriculture

We use the late nineteenth-century establishment of agricultural experiment stations at preexisting land-grant colleges across the United States to estimate the importance of proximity to research for productivity growth. Our analysis reveals that proximity to newly opened permanent stations affected land productivity for about 20 years and then subsequently declined until becoming largely absent today. We conclude that spatial frictions substantially reduced the rate of return to public research spending in the late nineteenth and early twentieth centuries, but such frictions significantly diminished as extension programs, automobiles, and telephones made it easier for discoveries to reach farther farms.

Insurance Rationing and the Origins of Workers? Compensation

A central question concerning the economic motivation for the adoption of workers compensation is the extent to which workers had access to their desired levels of private accident insurance around the turn of the century. If insurance were rationed then workers primary option would have been to use savings to protect against accident risk. We develop a theoretical model that suggests that workers compensation, under this market condition, should have caused a reduction in households precautionary saving. Our empirical test is based on a sample of over 7000 households surveyed for the 1917- 1919 Bureau of Labor Statistics Cost-of-Living study. Regression analysis suggests that households tended to save less, holding all else constant, if their states had workers compensation in force. This finding, in concert with qualitative information about the insurance industry, provides some evidence that insurance companies were unable to effectively offer workplace accident insurance to a wide range of workers. By shifting the burden of insurance from workers to employers, workers compensation benefitted risk-averse workers who were rationed out of the insurance market, even if they paid for their more generous post-accident benefits through lower wages.