Financial Asset Ownership and Political Partisanship: Liberty Bonds and Republican Electoral Success in the 1920s

Abstract

We analyze the effects of ownership of liberty bonds on election outcomes in the 1920s. We find that counties with higher liberty bond ownership rates turned against the Democratic Party in the presidential elections of 1920 and 1924. This was a reaction to the depreciation of the bonds prior to the 1920 election (when the Democrats held the presidency) and the appreciation of the bonds in the early 1920s (under a Republican president), as the Federal Reserve raised and then subsequently lowered interest rates. Our analysis suggests that the liberty bond campaigns had unintended political consequences.

Using Digitized Newspapers to Address Measurement Error in Historical Data

“…” Other examples of such salient events studied in previous literature are the 1918 influenza pandemic (Beach, Clay, and Saavedra 2022), natural disasters across the United States (Boustan et al 2020), labor strikes (Schmick 2018), the Tulsa race massacre in 1921 (Albright et al 2021), or the Bradlaugh-Besant trial of 1877 (Beach and Hanlon 2023). 29 Among these examples, studies of the 1918 influenza, for instance, that likely could have gainfully applied our methods are Almond (2006), Hatchett, Mecher, and Lipsitch (2007), Hilt and Rahn (2020), or Beach, Clay, and Saavedra (2022), all of whom use an intensity measure of the flu at the local level 30…”

“…Even though our newspaper-based measures were generated in a fast and arguably unrefined way, using this noisier measure still produces smaller but significant effects that are comparable to those in Clay, Schmick, and Troesken (2019) and Ager, Brueckner, and Herz (2017). Lastly, to show that our approach extends to other settings, we further replicate a study by Hilt and Rahn (2020) of the liberty loan program’s effect on political outcomes, as well as a paper by Howard and Ornaghi (2021), which studies the impact of the adoption of local prohibition policies on population, agricultural outcomes, and investment. Their treatment measures are different in nature from the boll weevil, an arrival time measure, to provide additional examples for when our strategies can be gainfully applied to deal with measurement error in historical data.…”

Persistent Pandemics

“… Clay et al (2018) uses a measure of proximity to the nearest military training camps as a determinant of mortality from in the 1918 pandemic. Hilt and Rahn. (2020) use average distance to military camps as an excluded instrumental variable to predict excess mortality in October 1918 while Correia, Luck, and Verner (2020) use distance weighted by the number of personnel at the bases as an excluded instrument to predict mortality from influenza in late 1918.…”

The Effect of the 1918 Influenza Pandemic on Income Inequality: Evidence from Italy

“…This approach is similar in spirit to Hilt and Rahn (2020) and Correia et al (2020), which exploit the distance to military camps as an instrument to the severity of the 1918 influenza. This variable is expressed in per capita terms (with the 1911 population).…”