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The Great U.K. Depression: A Puzzle and Possible Resolution

  • Harold L. Cole

    (University of California, Los Angeles)

  • Lee E. Ohanian

    (University of California, Los Angeles)

The UK was depressed for 20 years between the two World Wars. The decrease in output was entirely due to lower hours per worker and lower employment. Our main finding is that generous unemployment benefits, in conjunction with large negative sectoral shocks, is the most plausible candidate explanation for this depression. We also find that the conventional Keynesian monetary story for this period is unconvincing. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.2001.0140
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 5 (2002)
Issue (Month): 1 (January)
Pages: 19-44

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Handle: RePEc:red:issued:v:5:y:2002:i:1:p:19-44
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  1. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
  2. Lars Ljungqvist & Thomas J. Sargent, 1995. "The European unemployment dilemma," Working Paper Series, Macroeconomic Issues 95-17, Federal Reserve Bank of Chicago.
  3. Metcalf, David & Nickell, Stephen J & Floros, Nicos, 1982. "Still Searching for an Explanation of Unemployment in Interwar Britain," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 386-99, April.
  4. Benjamin, Daniel K & Kochin, Levis A, 1982. "Unemployment and Unemployment Benefits in Twentieth-Century Britain: A Reply to Our Critics [Searching for an Explanation of Unemployment in Interwar Britain]," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 410-36, April.
  5. Benjamin, Daniel K & Kochin, Levis A, 1979. "Searching for an Explanation of Unemployment in Interwar Britain," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 441-78, June.
  6. Harold L. Cole & Lee E. Ohanian, 2000. "Re-examining the contributions of money and banking shocks to the U.S. Great Depression," Staff Report 270, Federal Reserve Bank of Minneapolis.
  7. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  8. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  9. Harold L. Cole & Lee E. Ohanian, 2001. "The great U.K. depression: a puzzle and possible resolution," Staff Report 295, Federal Reserve Bank of Minneapolis.
  10. Eichengreen, Barry, 1987. "Unemployment in Interwar Britain: Dole or Doldrums?," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 597-623, December.
  11. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
  12. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  13. Maki, Dennis R & Spindler, Zane A, 1975. "The Effect of Unemployment Compensation on the Rate of Unemployment in Great Britain," Oxford Economic Papers, Oxford University Press, vol. 27(3), pages 440-54, November.
  14. Cogan, John F, 1981. "Fixed Costs and Labor Supply," Econometrica, Econometric Society, vol. 49(4), pages 945-63, June.
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