WWII and Since

Before , Poland 1940, low countries, France, etc US, underutilized industrial capacity  Began producing munitions before 1941  Exports, esp. to Britain

Output High Federal purchase Civil purchase fell Increased production in munitions How did the government allocate the resources?

Commandeering Tax income and wealth  Income tax  Profit  40% of the spending Borrowing Monetizing the debt  Treasury issued bonds and Fed bought them

Price Control Office of Price Administration Price ceiling, quantity Problems?  Quality More regulation! 6 page regulation on fruit cakes  Forced upgrades  Black market

US economy after WWII Rapid 3% a year % %

Features of Golden Age Stabilization  FDIC  Progressive tax rates  Unemployment insurance US leader  Free trade (RTA, GATT, etc)  Stable Exchange Rate (Bretton Woods)  Marshall Plan

Labor relationships Higher education Social safety net Reduced inequality  Until the 70’s Upward social mobility

The Great Migration and the South South: Economic backward Impact of New Deal  Before: low wage economy  After: African Americans moved north What to do?  Lure outside investors

Selling of the South Since the national minimum wage Southern states actively lure industry  Building plant spaces  Advertising  Tax incentives  Loans  Research Triangle in NC

Civil Rights Revolution Discrimination in the workplace  Occupation specific Economic incentives  Employers? Were they good?  Federal funding  Outside capital  Textiles: significant discrimination Education? Endogenous as well!

Economic Impacts What are the benefits of integration?  Efficiency? Textile employers Others? Education?  Business climate Immigration Black business owners

Revolution in women’s status Long-term trends  Lower fertility  Rising labor force participation  Higher education level

Contraceptives  “endogenous” women’s group supported the research Divorce rate increases sharply in 80’s  Changes in law (more states allowed unilateral divorce)  Better able to support themselves  Many more divorced, expectation and social norm

Labor Force Participation Rate

Female Percentage in Professional Schools

Changes after 1970’s Before:  Women were enrolled in college but not many went to work After  Co-ed  Choice of majors  Professional school enrollment increased Social norms and beliefs: women rejected from professional schools because they would not work Women did not apply in the first place

Inequality

Rise in Inequality

Explanations? Skilled-biased technical progress Globalization Immigrants Institutional changes

Skilled-biased technical progress College premium went up Why?  Exogenous innovation?  New technologies that required more skilled labor, thus demand for these workers increase  So called “skilled-biased” technical progress  Could be “endogenous”

Globalization More international trade U.S. specialize in high-tech industries Raised high-tech wage

Others Immigrants  More unskilled immigrants Institutional changes  Decline of unions  Real minimum wage decreased

“flexible” labor market Tolerance for wage differentials  Less regulation than western Europe US works more  Europeans retire early US works more  Longer hours Inequality and upward mobility, fear of losing job Regulations: US works more because we can!