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The Great U.K. Depression: A Puzzle and Possible Resolution

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  • Harold L. Cole

    (University of California, Los Angeles)

  • Lee E. Ohanian

    (University of California, Los Angeles)

Abstract

The UK was depressed for 20 years between the two World Wars. The decrease in output was entirely due to lower hours per worker and lower employment. Our main finding is that generous unemployment benefits, in conjunction with large negative sectoral shocks, is the most plausible candidate explanation for this depression. We also find that the conventional Keynesian monetary story for this period is unconvincing. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.2001.0140
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 5 (2002)
Issue (Month): 1 (January)
Pages: 19-44

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Handle: RePEc:red:issued:v:5:y:2002:i:1:p:19-44

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Related research

Keywords: unemployment benefits; sectoral shocks; workweek restriction;

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References

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  1. Eichengreen, Barry, 1987. "Unemployment in Interwar Britain: Dole or Doldrums?," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 597-623, December.
  2. Harold L. Cole & Lee E. Ohanian, 2001. "The great U.K. depression: a puzzle and possible resolution," Staff Report, Federal Reserve Bank of Minneapolis 295, Federal Reserve Bank of Minneapolis.
  3. Harold L. Cole & Lee E. Ohanian, 2000. "Re-examining the contributions of money and banking shocks to the U.S. Great Depression," Staff Report, Federal Reserve Bank of Minneapolis 270, Federal Reserve Bank of Minneapolis.
  4. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research 92-11, W.E. Upjohn Institute for Employment Research.
  5. Benjamin, Daniel K & Kochin, Levis A, 1979. "Searching for an Explanation of Unemployment in Interwar Britain," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(3), pages 441-78, June.
  6. Lars Ljungqvist & Thomas J. Sargent, 1996. "The European Unemployment Dilemma," EUI-RSCAS Working Papers, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS) 36, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  7. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers, Federal Reserve Bank of Minneapolis 597, Federal Reserve Bank of Minneapolis.
  8. Cogan, John F, 1981. "Fixed Costs and Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 945-63, June.
  9. Maki, Dennis R & Spindler, Zane A, 1975. "The Effect of Unemployment Compensation on the Rate of Unemployment in Great Britain," Oxford Economic Papers, Oxford University Press, vol. 27(3), pages 440-54, November.
  10. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  11. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(1), pages 3-16, January.
  12. 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, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  13. Benjamin, Daniel K & Kochin, Levis A, 1982. "Unemployment and Unemployment Benefits in Twentieth-Century Britain: A Reply to Our Critics [Searching for an Explanation of Unemployment in Interwar Britain]," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(2), pages 410-36, April.
  14. Metcalf, David & Nickell, Stephen J & Floros, Nicos, 1982. "Still Searching for an Explanation of Unemployment in Interwar Britain," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(2), pages 386-99, April.
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