Unemployment and Real Wages in Weimar Germany

N H Dimsdale (), N Horsewood and A van Riel
Additional contact information
N H Dimsdale: The Queen's College, Oxford
N Horsewood: Department of Economics, University of Birmingham
A van Riel: Social Policy, Netherlands Economic Institute, Rotterdam

No _056, Oxford University Economic and Social History Series from Economics Group, Nuffield College, University of Oxford

Abstract: This paper contributes to the debate on the causes of unemployment in interwar Germany. It applies the Layard-Nickell model of the labour market to interwar Germany, using a new quarterly data set. The basic model is extended to capture the effects of the tariff wage under the Weimar Republic and the Nazis. The estimated equations suggest that demand shocks, combined with nominal inertia in the labour market, were important in explaining unemployment. In addition real wage pressures due the political processes of wage determination were a major influence on unemployment. Negative demand shocks appear to have been initially domestic and to have started before the impact of the World Depression. Both negative developments on the demand side of the economy and pressures coming from the supply side raised unemployment in the slump. In the recovery the wage policies of the Nazis and the revival of demand both contributed to the fall in unemployment. The mutual reinforcement of these factors may help to explain the severity of the interwar cycle in Germany. It also serves to emphasize the close connection between political and economic processes in this important episode in macroeconomic history.

Keywords: Great Depression; Germany; real wages; unemployment (search for similar items in EconPapers)
JEL-codes: N14 E24 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his, nep-lab and nep-mac
Date: 2004-10-01

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