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Unemployment, Inflation, and Wages in the American Depression: Are There Lessons for Europe?

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  • Bernanke, Ben
  • Parkinson, Martin

Abstract

In this paper, we consider whether there are lessons to be drawn from the experience of the American economy during the 1930's for the current European situation. The comparison reveals some important differences: In particular, the persistence of American unemployment in the 1930's reflected to a much greater degree a sequence of large destabilizing shocks, and much less a low-level equilibrium trap, than does modern European unemployment. The self-correcting tendencies of the 1930's U.S. economy were probably much stronger than is generally acknowledged. However, the experience of the Depression era confirms the modern observation that the level of unemployment does not much affect the rate of inflation--an observation that, we argue, is consistent with macro theory. The Depression experience also supports the impression that political factors are important in real wage determination.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 79 (1989)
Issue (Month): 2 (May)
Pages: 210-14

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Handle: RePEc:aea:aecrev:v:79:y:1989:i:2:p:210-14

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  1. Peter Temin & Barrie A. Wigmore, 1988. "The End of One Big Deflation," Working papers 503, Massachusetts Institute of Technology (MIT), Department of Economics.
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Cited by:
  1. Robert A. Margo, 1992. "Employment and Unemployment in the 1930s," NBER Working Papers 4174, National Bureau of Economic Research, Inc.
  2. Antonio Spilimbergo & Steven A. Symansky & Carlo Cottarelli & Olivier J. Blanchard, 2009. "Fiscal Policy for the Crisis," IMF Staff Position Notes 2008/01, International Monetary Fund.
    • Antonio Spilimbergo & Steve Symansky & Olivier Blanchard & Carlo Cottarelli, 2009. "Fiscal Policy For The Crisis," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 10(2), pages 26-32, 07.
  3. Alfonso ARPAIA & Nicola CURCI, . "EU labour market behaviour during the Great Recession," Working Papers wp2010-6, Department of the Treasury, Ministry of the Economy and of Finance.
  4. Christina D. Romer, 1991. "What Ended the Great Depression?," NBER Working Papers 3829, National Bureau of Economic Research, Inc.
  5. Price V. Fishback & William C. Horrace & Shawn Kantor, 2001. "The Impact of New Deal Expenditures on Local Economic Activity: An Examination of Retail Sales, 1929-1939," NBER Working Papers 8108, National Bureau of Economic Research, Inc.

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