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Did U.S. wages become stickier between the world wars?

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  • Dighe, Ranjit S.
  • Schmitt, Elizabeth Dunne
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    Abstract

    This paper attempts to determine whether nominal wages became less responsive to labor market and price fluctuations during the 1920s or 1930s. Results of modified Phillips curve regressions, in which the monthly value of wages depends on lagged values of employment or total man-hours and prices, indicate considerable stickiness of wages throughout the interwar period. Neither the beginning of the Great Depression in 1929 nor the start of the New Deal in 1933 is associated with any discernible increase in wage stickiness. And the "Great Deflation" of 1920-1922 apparently did not include a greater responsiveness of wages to prices or labor-market conditions.

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    Bibliographic Info

    Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

    Volume (Year): 21 (2010)
    Issue (Month): 2 (August)
    Pages: 165-181

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    Handle: RePEc:eee:ecofin:v:21:y:2010:i:2:p:165-181

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    Web page: http://www.elsevier.com/locate/inca/620163

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    Keywords: Wage Rigidity Depression Business cycle;

    References

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    1. Hanes, Christopher, 1996. "Changes in the Cyclical Behavior of Real Wage Rates, 1870–1990," The Journal of Economic History, Cambridge University Press, vol. 56(04), pages 837-861, December.
    2. Robert J. Gordon, 1981. "Why U.S. Wage and Employment Behavior Differs from That in Britain and Japan," NBER Working Papers 0809, National Bureau of Economic Research, Inc.
    3. Michael D. Bordo & Christopher J. Erceg & Charles L. Evans, 1997. "Money, sticky wages, and the Great Depression," International Finance Discussion Papers 591, Board of Governors of the Federal Reserve System (U.S.).
    4. James John A., 1998. "The Early History of Nominal Wage Rigidity in American Industrial Labor Markets," Rivista di storia economica, Società editrice il Mulino, issue 3, pages 243-274.
    5. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
    7. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
    8. Temin, Peter & Wigmore, Barrie A., 1990. "The end of one big deflation," Explorations in Economic History, Elsevier, vol. 27(4), pages 483-502, October.
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    Cited by:
    1. Dodig, Nina & Herr, Hansjörg, 2014. "Previous financial crises leading to stagnation: Selected case studies," IPE Working Papers 33/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Nina Dodig & Hansjorg Herr, 2014. "Previous financial crises leading to stagnation – selected case studies," Working papers wpaper24, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

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