Income effects rely on long differences plus a parallel-trends unemployment check.

Evidence

Unfortunately, there is no high frequency data on economic outcomes. Instead, we examine long differences – the change in city-level incomes between 1928 and 1934 (published at the beginning of the year, that is, capturing the difference between late 1927, the peak of the economic cycle in Germany, and late 1933, slightly after the very bottom). Despite the potential measurement error created by using data further from the event we examine, we find strong real effects of the banking crisis. We also show that cities with and without Danat exposure exhibit no significant differences in unemployment rates between 1929 and 1930 and 1930 and 1931. — Sebastian Doerr et al., Financial Crises and Political…, 110

Categorization

• XREF: connects to: Foregone tax breaks compound into large wealth gaps over time. — Dorothy A. Brown, The Whiteness of Wealth: How the Tax…, 39; Higher unemployment suppresses wages and dampens inflation. — Clara E. Mattei, Escape from Capitalism: An Intervention, 271

Broader Connections

• Higher unemployment suppresses wages and dampens inflation. #qualifies (0.80) — Clara E. Mattei, Escape from Capitalism, 271
• Foregone tax breaks compound into large wealth gaps over time. #expands (0.72) — Dorothy A. Brown, The Whiteness of Wealth, 39