[Valery Ramey]...total output expended more in World War II because of two key factors.... labor force participation rates just skyrocketed during World War II. We would never expect that to happen during ordinary times. The average of productivity growth during World War II was 7%/year. We would never expect find a peacetime time like that. Now the rate of change of real GDP is going to be the sum of the increase in labor and the increase in productivity. The growth rate of labor was higher than you would ever expect in any non-war time. The growth rate of productivity was higher than you would ever expect in any non-war time. So I think that World War II might well be giving us exaggerated estimates of multipliers.
....When we look at this, what do we find? We were really surprised—we thought that multipliers would be higher in periods of high slack....
...everybody remembers the example of World War II. The unemployment rate was very high. Government spending increased. The unemployment rate went down to 1%. Isn’t that obvious? When I started looking at the labor market, I found that a big part of the picture was simply military conscription.
....Yes, private employment did go up some during World War II. There was some private employment effect, although I could not get it to be statistically significant. Big a part was military conscription. Thus to answer one of Brad’s questions, yes, the government could adopt a policy that would quickly reduce unemployment: large-scale military conscription. If the problem is with employment rates for young males, this is a great way to do something about that, but I don’t think anybody thinks that policy would be welfare-improving.
Which means there isn't any evidence for fiscal stimulus helping to get an economy out of recession.
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