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The Boom and the Slump: a Causal Account of the 1990s/2000s and the 1920s/1930s


  • Edmund Phelps


Not all booms are alike, nor are slumps. The institutions and the shocks are never exactly the same. Yet the late 1990s boom, and its unwinding, strikingly parallel the boom of the roaring 1920s, the deep decline into the early 1930s andonly a partial rebound. Both experiences began with an investment boom, then a downturn in investment while consumption held up. Economic activity closely tracked investment. The realizations of extraordinary productivity gains were present in the problematic and incomplete recovery of the 1930s, which suggests the possibility that return to the medium-term natural rate of unemployment may be a rather long process. I expect the rest of the decade to resemble the rest of the 1930s - a limited recovery with investment and employment below historical norms.

Suggested Citation

  • Edmund Phelps, 2004. "The Boom and the Slump: a Causal Account of the 1990s/2000s and the 1920s/1930s," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 7(1), pages 3-19.
  • Handle: RePEc:taf:jpolrf:v:7:y:2004:i:1:p:3-19 DOI: 10.1080/1384128042000219690

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    References listed on IDEAS

    1. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    2. Edwards, Sebastian & Edwards, Alejandra Cox, 1991. "Monetarism and Liberalization," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226184890.
    3. Basch, Michael & Paredes-Molina, Ricardo D., 1996. "Are there dual labor markets in Chile?: empirical evidence," Journal of Development Economics, Elsevier, vol. 50(2), pages 297-312, August.
    4. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
    5. William Wascher & David Neumark, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment," American Economic Review, American Economic Association, vol. 90(5), pages 1362-1396, December.
    6. Welch, Finis, 1974. "Minimum Wage Legislation in the United States," Economic Inquiry, Western Economic Association International, vol. 12(3), pages 285-318, September.
    7. Gang, Ira N & Tower, Edward, 1990. "Allocating Jobs under a Minimum Wage: Queues vs. Lotteries," The Economic Record, The Economic Society of Australia, vol. 66(194), pages 186-194, September.
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    More about this item


    Boom; Slump; Natural rate of unemployment; Expansion; Contraction; Rational booms; Productivity gains; JEL Code: E3;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles


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