Why did productivity fall so much during the Great Depression?
AbstractThis study assesses five common explanations for the large decline in U.S. total factor productivity (TFP) during the Great Depression: changes in capacity utilization, factor input quality, and production composition; labor hoarding; and increasing returns to scale. The study finds that these factors explain less than one-third of the 18 percent TFP decline between 1929 and 1933. The rest of the decline remains unexplained. The study offers a potential explanation: declines in organization capital, the knowledge firms use to organize production, caused by breakdowns in relationships between firms and their suppliers, for example. As some firms failed during the Depression, efficiency in surviving firms decreased; managers had to shift time away from production in order to establish new relationships, and firms had to shift to unfamiliar technologies that initially were operated inefficiently. This article originally appeared in the American Economic Review. (c) 2001 by the American Economic Association.
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Bibliographic InfoArticle provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.
Volume (Year): (2002)
Issue (Month): Spr ()
Other versions of this item:
- Lee E. Ohanian, 2001. "Why Did Productivity Fall So Much during the Great Depression?," American Economic Review, American Economic Association, vol. 91(2), pages 34-38, May.
- Lee E. Ohanian, 2001. "Why did productivity fall so much during the Great Depression?," Staff Report 285, Federal Reserve Bank of Minneapolis.
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
- N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
- P14 - Economic Systems - - Capitalist Systems - - - Property Rights
- E - Macroeconomics and Monetary Economics
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.:
- Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
- Ben S. Bernanke & Martin L. Parkinson, 1990.
"Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries,"
NBER Working Papers
3503, National Bureau of Economic Research, Inc.
- Bernanke, Ben S & Parkinson, Martin L, 1991. "Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 439-59, June.
- Harold L. Cole & Lee E. Ohanian, 2001.
"Re-Examining the Contributions of Money and Banking Shocks to the U.S. Great Depression,"
in: NBER Macroeconomics Annual 2000, Volume 15, pages 183-260
National Bureau of Economic Research, Inc.
- Harold L. Cole & Lee E. Ohanian, 2000. "Re-examining the contributions of money and banking shocks to the U.S. Great Depression," Staff Report 270, Federal Reserve Bank of Minneapolis.
- Andrew Atkeson & Patrick J. Kehoe, 2005.
"Modeling and measuring organization capital,"
291, Federal Reserve Bank of Minneapolis.
- Andrew Atkeson & Patrick J. Kehoe, 1993. "Industry evolution and transition: the role of information capital," Staff Report 162, Federal Reserve Bank of Minneapolis.
- Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
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