IDEAS home Printed from https://ideas.repec.org/a/fip/fedmqr/y2002isprnv.26no.2.html
   My bibliography  Save this article

Why did productivity fall so much during the Great Depression?

Author

Listed:
  • Lee E. Ohanian

Abstract

This study assesses five common explanations for the large decline in U.S. total factor productivity (TFP) during the Great Depression: changes in capacity utilization, factor input quality, and production composition; labor hoarding; and increasing returns to scale. The study finds that these factors explain less than one-third of the 18 percent TFP decline between 1929 and 1933. The rest of the decline remains unexplained. The study offers a potential explanation: declines in organization capital, the knowledge firms use to organize production, caused by breakdowns in relationships between firms and their suppliers, for example. As some firms failed during the Depression, efficiency in surviving firms decreased; managers had to shift time away from production in order to establish new relationships, and firms had to shift to unfamiliar technologies that initially were operated inefficiently. This article originally appeared in the American Economic Review. (c) 2001 by the American Economic Association.

Suggested Citation

  • Lee E. Ohanian, 2002. "Why did productivity fall so much during the Great Depression?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr.
  • Handle: RePEc:fip:fedmqr:y:2002:i:spr:n:v.26no.2
    as

    Download full text from publisher

    File URL: http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=941
    Download Restriction: no

    File URL: http://www.minneapolisfed.org/research/QR/QR2622.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Harold L. Cole & Lee E. Ohanian, 2001. "Re-Examining the Contributions of Money and Banking Shocks to the U.S. Great Depression," NBER Chapters,in: NBER Macroeconomics Annual 2000, Volume 15, pages 183-260 National Bureau of Economic Research, Inc.
    2. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and Measuring Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1026-1053, October.
    3. Bernanke, Ben S & Parkinson, Martin L, 1991. "Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 439-459, June.
    4. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
    5. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-461, June.
    6. Andrew Atkeson & Patrick J. Kehoe, 1993. "Industry evolution and transition: the role of information capital," Staff Report 162, Federal Reserve Bank of Minneapolis.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Depressions ; Industrial productivity ; Econometric models;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmqr:y:2002:i:spr:n:v.26no.2. 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: (Jannelle Ruswick). General contact details of provider: http://edirc.repec.org/data/frbmnus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.