EconPapers    
Economics at your fingertips  
 

New Deal policies and the persistence of the Great Depression: a general equilibrium analysis

Harold Linh Cole () and Lee Edward Ohanian ()

No 597, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: There are two striking aspects of the recovery from the Great Depression in the United States: the recovery was very weak and real wages in several sectors rose significantly above trend. These data contrast sharply with neoclassical theory, which predicts a strong recovery with low real wages. We evaluate the contribution of New Deal cartelization policies designed to limit competition and increase labor bargaining power to the persistence of the Depression. We develop a model of the bargaining process between labor and firms that occurred with these policies, and embed that model within a multi-sector dynamic general equilibrium model. We find that New Deal cartelization policies are an important factor in accounting for the post-1933 Depression. We also find that the key depressing element of New Deal policies was not collusion per se, but rather the link between paying high wages and collusion.

Keywords: Depressions (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (40) Track citations by RSS feed

Published in Journal of Political Economy (Vol. 112, No. 4, 2004, pp. 779-816)

Downloads: (external link)
http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=794
Our link check indicates that this URL is bad, the error code is: 503 Server Error
http://www.minneapolisfed.org/research/wp/wp597.pdf (application/pdf)

Related works:
Journal Article: New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis (2004) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fip:fedmwp:597

Ordering information: This working paper can be ordered from
http://www.minneapolisfed.org/pubs/

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Minneapolis
Contact information at EDIRC.
Series data maintained by Janelle Ruswick ().

 
Page updated 2014-11-24
Handle: RePEc:fip:fedmwp:597