Advanced Search
MyIDEAS: Login

Elasticity of factor substitution and the rise in labor's share of income during the Great Depression

Contents:

Author Info

  • Fabien Tripier

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)

Abstract

The sudden rise in labor's share of income during the U.S. Great Depression of 1929-1933 is examined. To explain this phenomenon, the deflation-based model of the Great Depression of Bordo et al. (2000) [Bordo, M.D.; Erceg, C.J.; Evans, C.L. "Money, Sticky Wages, and the Great Depression." American Economic Review 90:5, 1447-63.] is extended to the case of a Constant Elasticity of factor Substitution (CES) production function. It is shown that considering the low elasticity of factor substitution allows the model to explain the rise in labor's share of income, improves the model's predictions on other macroeconomic variables, and renders the issue of productivity during the Great Depression less puzzling.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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.
File URL: http://hal.archives-ouvertes.fr/docs/00/41/93/43/PDF/LEMNA_WP_200911.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00419343.

as in new window
Length:
Date of creation: 23 Sep 2009
Date of revision:
Handle: RePEc:hal:wpaper:hal-00419343

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00419343/en/
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Gomme, Paul & Greenwood, Jeremy, 1995. "On the cyclical allocation of risk," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 91-124.
  2. Mark Weder, 2006. "The Role Of Preference Shocks And Capital Utilization In The Great Depression," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1247-1268, November.
  3. Monique Ebell & Albrecht Ritschl, 2007. "Real Origins of the Great Depression: Monopolistic Competition, Union Power, and the American Business Cycle in the 1920s," SFB 649 Discussion Papers SFB649DP2007-006, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  4. Eichengreen, Barry & Sachs, Jeffrey, 1985. "Exchange Rates and Economic Recovery in the 1930s," The Journal of Economic History, Cambridge University Press, vol. 45(04), pages 925-946, December.
  5. Harrison, Sharon G. & Weder, Mark, 2006. "Did sunspot forces cause the Great Depression?," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1327-1339, October.
  6. Klump, Rainer & Saam, Marianne, 2006. "Calibration of normalised CES production functions in dynamic models," ZEW Discussion Papers 06-78, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Michael D. Bordo & Christopher J. Erceg & Charles L. Evans, 1997. "Money, sticky wages, and the Great Depression," Working Paper Series, Macroeconomic Issues WP-97-02, Federal Reserve Bank of Chicago.
  8. Simon Kuznets & Lillian Epstein & Elizabeth Jenks, 1941. "National Income and Its Composition, 1919-1938, Volume I," NBER Books, National Bureau of Economic Research, Inc, number kuzn41-1, May.
  9. Andrew Young, 2004. "Labor's Share Fluctuations, Biased Technical Change, and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 916-931, October.
  10. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
  11. Gary D. Hansen & Edward C. Prescott, 2005. "Capacity constraints, asymmetries, and the business cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 850-865, October.
  12. Harold L. Cole & Lee E. Ohanian & Ron Leung, 2005. "Deflation and the international Great Depression: a productivity puzzle," Staff Report 356, Federal Reserve Bank of Minneapolis.
  13. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2004. "The Great Depression and the Friedman-Schwartz hypothesis," Working Paper 0318, Federal Reserve Bank of Cleveland.
  14. V V Chari & Patrick J Kehoe & Ellen R. McGrattan, 2003. "Business Cycle Accounting," Levine's Bibliography 506439000000000421, UCLA Department of Economics.
  15. Michele Boldrin & Michael Horvath, 1994. "Labor Contracts and Business Cycles," Discussion Papers 1068, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Rainer Klump & Peter McAdam & Alpo Willman, 2007. "Factor Substitution and Factor-Augmenting Technical Progress in the United States: A Normalized Supply-Side System Approach," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 183-192, February.
  17. Simon Kuznets, 1937. "National Income and Capital Formation, 1919-1935," NBER Books, National Bureau of Economic Research, Inc, number kuzn37-1, May.
  18. Jang-Ting Guo & Kevin J. Lansing, 2008. "Capital-labor substitution, equilibrium indeterminacy, and the cyclical behavior of labor income," Working Paper Series 2008-06, Federal Reserve Bank of San Francisco.
  19. Hanes, Christopher, 1996. "Changes in the Cyclical Behavior of Real Wage Rates, 1870–1990," The Journal of Economic History, Cambridge University Press, vol. 56(04), pages 837-861, December.
  20. Ben S. Bernanke & Kevin Carey, 1996. "Nominal Wage Stickiness and Aggregate Supply in the Great Depression," NBER Working Papers 5439, National Bureau of Economic Research, Inc.
  21. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
  22. Chirinko, Robert S., 2008. "[sigma]: The long and short of it," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 671-686, June.
  23. 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.
  24. Gomme, Paul & Rupert, Peter, 2007. "Theory, measurement and calibration of macroeconomic models," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 460-497, March.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00419343. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.