An Establishment-Level View of the Great Depression

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The Great Depression was the most serious economic crisis in American history and so has attracted great interest from economists. For good or bad, the Depression serves as a litmus test for numerous economic policy debates. For this reason, any contribution to our understanding of this period strengthens the quality of debate surrounding these issues and will lead to better policy. Almost all existing studies of the Depression have relied on aggregate data, leaving economists with an incomplete understanding of the decline and recovery.The goal of this project is collect two comprehensive sets of micro-level observations from the Great Depression. The first source is the Census of Manufactures taken in 1929, 1931, 1933, and 1935. The comprehensive sample, which would be released publicly, would combine a newly collected set of industries with previously collected data on particular states and industries. In total, the sample proposed here will comprise more than 10% of the extant schedules. A limitation of the Census records is a lack of information on the financial position of the establishments or their parent companies. Our second source of data is the records of Dun & Bradstreet (D&B), a major credit rating agency at the time, which fills that gap. In particular, this source provides a measure of creditworthiness, similar to modern credit ratings, and an estimate of the establishment's net worth. The end product of this project will be a true public good serving as a central resource for economic historians and macroeconomists studying the Depression.We then plan to answer some simple though crucial questions regarding the declines in key macro aggregates, including employment and the price level. We also will link the owners of the establishments to the population censuses of 1920 and 1930 to obtain demographic information. This will allow us to study, particularly for small business owners, what characteristics of the owners themselves helped predict survival. This will offer insights into the role of credit constraints in the Depression. Finally, we will use the ability to link the establishments into their parent companies to study the role of "markets" for resources inside of the firm. In particular, we will address whether they can act as a substitute for the malfunctioning external capital markets at the time. For these last two projects, the D&B records will be crucial in providing information on the dependence of businesses on external credit.