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Can the Great Compression be explained by Wartime Wage Controls?

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  • Vickers, Chris
  • Ziebarth, Nicolas L.

Abstract

The wage controls of the National War Labor Board (NWLB) have been credited with contributing to the decline in income inequality from 1940 to 1950 that occurred along many different dimensions including across regions and occupations. We calculate an upper bound for the effect of the NWLB during this decade by assuming the controls were maximally binding. At the upper bound, the controls could explain an important fraction of cross-region convergence, but they likely had little effect on inequality between occupations. Moreover, because of sorting by race and education into occupations, the controls cannot explain much of the narrowing of the educational skill premium nor the racial gap. We conclude that the controls are not a “one size fits all” explanation for the Great Compression.

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  • Vickers, Chris & Ziebarth, Nicolas L., 2025. "Can the Great Compression be explained by Wartime Wage Controls?," Explorations in Economic History, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:exehis:v:98:y:2025:i:c:s0014498325000385
    DOI: 10.1016/j.eeh.2025.101691
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    JEL classification:

    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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