The authors compute the potential economic benefits that would accrue to a typical pre-WWII era U.S. worker from the post-WWII macroeconomic policy regime. The authors assume that workers face undiversifiable income risk but can self-insure by saving in nominal assets. The worker's average utility is computed for two eras: pre-WWII (1875-1941) and post-WWII. In the pre-WWII era, the worker endured business cycles that were large in amplitude and quite volatile, a procyclical aggregate price level with large cyclical amplitude, a high average unemployment rate, and virtually no trend in the aggregate price level. In the post-WWII era, the same worker would have encountered business cycles with smaller amplitude and less volatility, a countercyclical aggregate price level with small cyclical amplitude, a much lower mean unemployment rate, and a positive trend in the aggregate price level. Depending on what is assumed about the effects of macroeconomic policies on the mean and var iance of the unemployment rate, the potential gain in the worker's welfare ranges between -0.9 (if policies affected the inflation rate but not the mean or variance of the aggregate unemployment rate) to 4.19 percent of consumption (if policies affected the inflation rate and lowered the mean and variance of the aggregate unemployment rate).
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number
99-2.
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.:
D. Hoover, 1960.
"Retail Prices after 1850,"
NBER Chapters,
in: Trends in the American Economy in the Nineteenth Century, pages 141-190
National Bureau of Economic Research, Inc.
[Downloadable!]