https://macropaperwarehouse.com/authors/jonathan-rothbaum/Jonathan RothbaumHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/the-long-run-impacts-of-public-industrial-investment-on-local-development-and-economic-mobility-evidence-from-world-war-ii/https://macropaperwarehouse.com/papers/the-long-run-impacts-of-public-industrial-investment-on-local-development-and-economic-mobility-evidence-from-world-war-ii/<p><strong>Research Question.</strong> Does government-led construction of large manufacturing plants in previously under-industrialized regions generate long-run improvements in regional economic development and in the lifetime earnings of the incumbent residents who were already living there at the outset? And, if so, through what mechanism — developmental improvements during childhood or expanded adult labor market opportunities?</p> <p><strong>Setting and Identification.</strong> The paper exploits the United States industrial mobilization for World War II, specifically the construction of 90 large, government-financed, newly-built manufacturing plants (each costing $10 million or more in contemporary dollars, approximately $150 million in 2020 dollars) in dispersed locations outside the major prewar manufacturing hubs. Strategic and security considerations — not economic optimization — drove the military to insist these plants be sited away from congested industrial centers. Because private firms were unwilling to finance construction in isolated locations with uncertain postwar value, the government built them directly as government-owned, contractor-operated (GOCO) facilities through the Defense Plant Corporation. Site selection within the set of sufficiently populated regions was governed by idiosyncratic, short-run factors — the immediate availability of suitable parcels, informal connections to procurement officers, and expedience — rather than systematic economic characteristics of the receiving counties. The paper documents no systematic association between publicly-funded wartime plant construction and prewar county-level economic or demographic characteristics conditional on population size, and finds parallel prewar trends and balanced outcome levels across treatment and comparison counties in all decades leading up to WWII. A placebo test using 1910-to-1940 intergenerational mobility in matched Census records confirms no differential prewar upward mobility in treatment counties.</p>