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Labour markets in the interwar period and economic recovery in the UK and the USA

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  • Timothy J. Hatton
  • Mark Thomas

Abstract

We examine the labour-market experience of the UK and the US in the recessions of the early 1920s and the early 1930s and the subsequent recoveries. These were deep recessions, comparable to that of 2008--9, but the recoveries were very different. In the UK the recovery of the 1920s was incomplete, but that of the 1930s was rather less protracted than in the US. By contrast the US experienced very strong recovery in the 1920s but weaker recovery from the much deeper recession of the 1930s. A key ingredient to understanding these patterns is the interaction between economic shocks and labour-market institutions. Here we survey the large literature on interwar labour markets to identify the key elements that underpinned labour-market performance. We find that developments in wage-setting institutions and in unemployment insurance inhibited a return to full employment in interwar Britain, while, in the US, New Deal legislation impeded labour-market adjustment in the 1930s. We conclude with an assessment of the policy responses to labour-market crises in the past and in the present. Copyright 2010, Oxford University Press.

Suggested Citation

  • Timothy J. Hatton & Mark Thomas, 2010. "Labour markets in the interwar period and economic recovery in the UK and the USA," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 463-485, Autumn.
  • Handle: RePEc:oup:oxford:v:26:y:2010:i:3:p:463-485
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    File URL: http://hdl.handle.net/10.1093/oxrep/grq023
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    Cited by:

    1. Bertil Holmlund, 2013. "Wage and employment determination in volatile times: Sweden 1913-1939," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 7(2), pages 131-159, May.
    2. repec:ilo:ilowps:486240 is not listed on IDEAS
    3. Ghoshray, Atanu & Stamatogiannis, Michalis P., 2015. "Centurial evidence of breaks in the persistence of unemployment," Economics Letters, Elsevier, vol. 129(C), pages 74-76.
    4. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 285-317, Autumn.
    5. Barry Eichengreen, 2016. "The Great Depression in a Modern Mirror," De Economist, Springer, vol. 164(1), pages 1-17, March.
    6. repec:eee:moneco:v:92:y:2017:i:c:p:112-129 is not listed on IDEAS

    More about this item

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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