Public Relief and Private Employment in the Great Depression

Abstract

The unemployment relief programs introduced by the federal government in the 1930s were the largest single factor in the growth of the federal budget over the decade. We develop a model that enables us to estimate the effects of the relief programs on private employment. Cross-sectional data bearing on the operation of the Federal Emergency Relief Administration rejects the hypothesis that the federal relief programs reduced private employment. Individuals did respond to the incentives of relief benefits, but only by moving between relief and non-relief unemployment.