After the War

Household saving increased dramatically during World War II. By the end of the war, Americans had accumulated substantial liquid assets, largely in the form of war bonds and deposit holdings. This paper examines how wartime accumulation of liquid assets were used by households in the years immediately after World War II, when rationing was relaxed. I exploit geographic variation in wartime saving. Because saving may be endogenous, I use war spending as an instrument for wartime saving. I find that wartime asset accumulation helped fuel a boom in residential investment in the late 1940s. IWartime saving is strongly associated with increases in the housing stock in the immediate postwar years. A 10% increase in wartime saving is associated with a 2.9% to 7.1% increase in the number of housing units in a commuting zone between 1940 and 1950. †Assistant Professor of Economics, Wesleyan University. 238 Church Street # 123, Middletown, CT 06459-0007. Email: gbrunet@wesleyan.edu. I am grateful to Christina Romer, Elisabeth Perlman, Colin Weiss, and Noam Yuchtman for comments and advice. Ellora Derenoncourt collaborated to read, clean, and harmonize the data from the 1947–1950 Surveys of Consumer Finances. Joseph West provided excellent research assistance. All errors are my own.