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Ireland’s Great Depression

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Author Info
Alan Ahearne (J. E. Cairnes Graduate School of Business and Public Policy, NUI Galway)
Finn Kydland (University of California Santa Barbara)
Mark A. Wynne (Federal Reserve Bank of Dallas)

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Abstract

We argue that Ireland experienced a great depression in the 1980s comparable in severity to the better known and more studied depression episodes of the interwar period. Using the business cycle accounting framework of Chari, Kehoe and McGrattan (2005), we examine the factors that led to the depression and the subsequent recovery in the 1990s. We calculate efficiency, labour, investment and government wedges and evaluate the contribution of each to the downturn and subsequent recovery. We find that the efficiency wedge on its own can account for a significant portion of the downturn, but predicts a stronger recovery in output than occurred. The labour wedge also helps account for what happened during the depression episode. We also find that the investment wedge played no role in the depression.

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File URL: http://www.esr.ie/Vol37_2/05_ahearne_article.pdf
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File Function: First version, 2006
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Publisher Info
Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 37 (2006)
Issue (Month): 2 ()
Pages: 215-243
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:eso:journl:v:37:y:2006:i:2:p:215-243

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Balke, Nathan S & Wynne, Mark A, 1996. "Are Deep Recessions Followed by Strong Recoveries? Results for the G-7 Countries," Applied Economics, Taylor and Francis Journals, vol. 28(7), pages 889-97, July. [Downloadable!] (restricted)
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  2. Patrick Honohan & Brendan Walsh, 2002. "Catching Up with the Leaders: The Irish Hare," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2002-1), pages 1-78. [Downloadable!]
  3. Timothy J. Kehoe & Edward C. Prescott, 2002. "Great Depressions of the Twentieth Century," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January. [Downloadable!] (restricted)
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  4. Barro, Robert J & Sahasakul, Chaipat, 1983. "Measuring the Average Marginal Tax Rate from the Individual Income Tax," Journal of Business, University of Chicago Press, vol. 56(4), pages 419-52, October. [Downloadable!] (restricted)
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  5. David Carey & Harry Tchilinguirian, 2000. "Average Effective Tax Rates on Capital, Labour and Consumption," OECD Economics Department Working Papers 258, OECD, Economics Department. [Downloadable!]
  6. Wynne, Mark A. & Balke, Nathan S., 1992. "Are deep recessions followed by strong recoveries?," Economics Letters, Elsevier, vol. 39(2), pages 183-189, June. [Downloadable!] (restricted)
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  7. Barro, Robert J & Sahasakul, Chaipat, 1986. "Average Marginal Tax Rates from Social Security and the Individual Income Tax," Journal of Business, University of Chicago Press, vol. 59(4), pages 555-66, October. [Downloadable!] (restricted)
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  8. Hall, Robert E, 1997. "Macroeconomic Fluctuations and the Allocation of Time," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S223-50, January. [Downloadable!] (restricted)
  9. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24. [Downloadable!]
  10. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006. "Business cycle accounting," Staff Report 328, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  11. Wu, Yangru & Zhang, Junxi, 2000. "Endogenous markups and the effects of income taxation:: Theory and evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 77(3), pages 383-406, September. [Downloadable!] (restricted)
  12. Mario J. Crucini & James Kahn, 2003. "Tariffs and the Great Depression Revisited," Working Papers 0316, Department of Economics, Vanderbilt University. [Downloadable!]
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  13. Suparna Chakraborty, 2004. "Accounting for the 'Lost Decade' in Japan," Macroeconomics 0408009, EconWPA. [Downloadable!]
  14. Keiichiro Kobayashi & Masaru Inaba, 2005. "Business Cycle Accounting for the Japanese Economy," Discussion papers 05023, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Erasmus Kristoffer Kersting, 2008. "The 1980s Recession in the UK: A Business Cycle Accounting Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 179-191, January. [Downloadable!] (restricted)
  2. Simona E. Cociuba & Alexander Ueberfeldt, 2008. "Driving Forces of the Canadian Economy: An Accounting Exercise," Working Papers 08-14, Bank of Canada. [Downloadable!]
    Other versions:
  3. Keiichiro Kobayashi & Masaru Inaba, 2006. "Borrowing constraints and protracted recessions," Discussion papers 06011, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  4. Sustek, Roman, 2009. "Monetary Business Cycle Accounting," MPRA Paper 17518, University Library of Munich, Germany. [Downloadable!]
  5. Zheng, Jinghai & Bigsten, Arne & Hu, Angang, 2006. "Can China’s Growth be Sustained? A Productivity Perspective," Working Papers in Economics 236, Göteborg University, Department of Economics. [Downloadable!]
    Other versions:
  6. Chakraborty, Suparna, 2008. "Indian Economic Growth: Lessons for the Emerging Economies," Working Papers RP2008/67, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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