Relative wage setting, contracts and unemployment during the deflations of 1920-22 and 1931-34 in Sweden

Klas Fregert

No 1999:2, Working Papers from Lund University, Department of Economics

Abstract: Recent research on the Great Depression has concluded that a worldwide decline in aggregate demand, emanating from the United States, was propagated into a fall in real activity through sticky nominal wages. The question remains: Why were nominal wages so sticky? I examine two hypotheses based on relative wage setting. Based on a wide range of evidence for Sweden, I argue that the 1920-22 depression is compatible with the staggered wage contract model and the 1930s depression with the co-ordination failure model.

Keywords: Wage contracts; Fischer-Taylor model; unemployment; Sweden; Depression; relative wage setting (search for similar items in EconPapers)
JEL-codes: E31 E32 E65 (search for similar items in EconPapers)
Pages: 43 pages
Date: 1999-03-04, Revised 1999-04-21
New Economics Papers: this item is included in nep-his, nep-lab and nep-ltv
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Published in Deflation. Current and historical perspectives., Burdekin, Richard, Siklos, Pierre (eds.), 2004, chapter 4, pages 91-130, Cambridge University Press.

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:1999_002

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