Hard times in the land of plenty: The effect on income and disability later in life for people born during the great depression

- Examines the effect of macroeconomic conditions at birth on later life outcomes.
- May help clarify why current literature has mixed findings.
- Measures impact of very serious downturn on later life outcomes.
- Findings indicate a non-linear relationship between birth state income and later life outcomes.
- Impact depends on decline in birth state income and also on its initial level.

We use 20th-century data to examine how community economic conditions at the time of birth influenced various measures of socioeconomic success as adults. Our analysis focuses on the worst downturn ever experienced in the United States: the Great Depression. We merge individual information reported by respondents in the U.S. Censuses of 1970 and 1980 with information on state per capita income during the individual's year of birth in their state of birth. Results indicate that the effect of state income per capita in the birth year on income and disability later in life varies with changes in income levels. Individuals born in the trough of the Depression in low-income states had substantially lower incomes and higher work disability rates later in life than workers born in those states in the peak year of 1929. However, the effect of being born during the trough of the Depression in states with higher incomes during the first half of the 20th century was much weaker on income and disability later in life.