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The Causes of Unemployment in Interwar Australia

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  • Nicholas H. Dimsdale
  • Nicholas J. Horsewood

Abstract

This paper examines the factors contributing to unemployment in Australia during the Great Depression of the 1930s. Previous writers have emphasised the role of demand–side variables but it has also been argued that excessive real wages caused unemployment. The Layard–Nickell model, developed originally for the postwar British economy, is applied to Australian data. The empirical results confirm that demand shocks in the form of changes in government spending and in the terms of trade were important in both downturn and recovery. Wage indexation resulted in some rigidity of real wages but this was not a major cause of unemployment.

Suggested Citation

  • Nicholas H. Dimsdale & Nicholas J. Horsewood, 2002. "The Causes of Unemployment in Interwar Australia," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 388-405, December.
    • Handle: RePEc:bla:ecorec:v:78:y:2002:i:243:p:388-405
    DOI: 10.1111/1475-4932.00066
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    Cited by:

    1. Nicholas Dimsdale & N.H. Horsewood & A. van Riel, 2004. "Unemployment and Real Wages in Weimar Germany," Oxford Economic and Social History Working Papers _056, University of Oxford, Department of Economics.
    2. Jonathan Payne & Lawrence Uren, 2014. "Economic Policy and the Great Depression in a Small Open Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(2-3), pages 347-370, March.

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