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The Role of Preference Shocks and Capital Utilization in the Great Depression

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  • Mark Weder

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Abstract

The paper investigates the notion that preference shocks play a central role in our understanding of the Great Depression. I identify a series of universally large negative shocks which destabilized the U.S. during the 1930s. When the artificial economy is paired with variable capital utilization and mildly increasing returns to scale in production, it is able to account for most of the decline in economic activity and it is able to predict realistic persistence.

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File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/wp0405.pdf
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Bibliographic Info

Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 200405.

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Date of creation: 15 Dec 2004
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Handle: RePEc:san:cdmawp:0405

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Keywords: Great depression; preference shocks; dynamic general equilibrium.;

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References

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Citations

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Cited by:
  1. Sharon Harrison & Mark Weder, 2009. "Technological Change and the Roaring Twenties: A Neoclassical Perspective," School of Economics Working Papers 2009-29, University of Adelaide, School of Economics.
  2. Fabien Tripier, 2009. "Elasticity of factor substitution and the rise in labor's share of income during the Great Depression," Working Papers hal-00419343, HAL.
  3. Bridji, Slim, 2013. "The French Great Depression: A business cycle accounting analysis," Explorations in Economic History, Elsevier, vol. 50(3), pages 427-445.
  4. Özer Karagedikli & Troy Matheson & Christie Smith & Shaun P. Vahey, 2007. "RBCs and DSGEs:The Computational Approach to Business Cycle Theory and Evidence," Reserve Bank of New Zealand Discussion Paper Series DP2007/15, Reserve Bank of New Zealand.
  5. Alex Klein & Keisuke Otsu, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," Studies in Economics 1317, Department of Economics, University of Kent.
  6. Klein, Alexander & Leunig, Tim, 2013. "Gibrat’s Law and the British Industrial Revolution," CAGE Online Working Paper Series 146, Competitive Advantage in the Global Economy (CAGE).

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