Re-Examining the Role of Sticky Wages in the U.S. Great Contraction: A Multi-sector Approach

Pedro Amaral and James (Jim) MacGee (jmacgee@bank-banque-canada.ca)

No 20125, University of Western Ontario, Economic Policy Research Institute Working Papers from University of Western Ontario, Economic Policy Research Institute

Abstract: We quantify the role of contractionary monetary shocks and wage rigidities in the U.S. Great Contraction. While the average economy-wide real wage varied little over 1929-33, real wages rose significantly in some industries. We calibrate a two-sector model with intermediates to the 1929 U.S. economy where wages in one sector adjust slowly. We find that nominal wage rigidities can account for less than a fifth of the fall in GDP over 1929-33. Intermediate linkages play a key role, as the output decline in our benchmark is roughly half as large as in our two-sector model without intermediates.

Keywords: Great Depression; Sectoral Models; Sticky Wages (search for similar items in EconPapers)
JEL-codes: E20 E30 E50 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Re-Examining the Role of Sticky Wages in the U.S. Great Contraction: A Multisectoral Approach (2009)
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