Labor productivity during the Great Depression
AbstractIn a recent paper, Bemanke and Parkinson (1991) studied interwar U.S. manufacturing data with the objective of assessing competing theories of the business cycle. An important finding was that short-run increasing returns to Labor (SRIRL), or procyclical labor productivity, was at least as strong during the Great Depression as in the postwar period. The authors conclude that this information casts further doubt on the real business cycle explanation of economic fluctuations. The purpose of this note is to point out that, within the data set analyzed by Bemanke and Parkinson (20% of the manufacturing sector), labor productivity during the Great Depression (1928:III to 1933:1) was procyclical in some industries and countercyclical in others. Furthermore, our measure of labor productivity for the entire manufacturing sector during this period was countercyclical. We conclude that the evidence is not favorable toward the hypothesis that large, negative aggregate demand shocks pushed the 1929-33 economy down a static, neoclassical production function. Another possibility is that firms which typically hoarded labor during recessions chose not to do so during the 1929-33 period.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Chicago in its series Working Paper Series, Macroeconomic Issues with number 93-10.
Date of creation: 1993
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- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
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