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Labor productivity during the Great Depression

Author

Listed:
  • Michael D. Bordo

  • Charles L. Evans

Abstract

In a recent paper, Bemanke and Parkinson (1991) studied interwar U.S. manufacturing data with the objective of assessing competing theories of the business cycle. An important finding was that short-run increasing returns to Labor (SRIRL), or procyclical labor productivity, was at least as strong during the Great Depression as in the postwar period. The authors conclude that this information casts further doubt on the real business cycle explanation of economic fluctuations. The purpose of this note is to point out that, within the data set analyzed by Bemanke and Parkinson (20% of the manufacturing sector), labor productivity during the Great Depression (1928:III to 1933:1) was procyclical in some industries and countercyclical in others. Furthermore, our measure of labor productivity for the entire manufacturing sector during this period was countercyclical. We conclude that the evidence is not favorable toward the hypothesis that large, negative aggregate demand shocks pushed the 1929-33 economy down a static, neoclassical production function. Another possibility is that firms which typically hoarded labor during recessions chose not to do so during the 1929-33 period.
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Suggested Citation

  • Michael D. Bordo & Charles L. Evans, 1993. "Labor productivity during the Great Depression," Working Paper Series, Macroeconomic Issues 93-10, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhma:93-10
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    Cited by:

    1. Pedro S. Amaral & James MacGee, 2009. "Re-Examining the Role of Sticky Wages in the U.S. Great Contraction: A Multisectoral Approach," Working Papers (Old Series) 0911, Federal Reserve Bank of Cleveland.
    2. James C. MacGee & Pedro S. Amaral, 2010. "A Multi-sectoral Approach to the U.S. Great Depression," 2010 Meeting Papers 1242, Society for Economic Dynamics.
    3. Robert A Hart, 2022. "Labour productivity during the Great Depression and the Great Recession in UK engineering and metal manufacture [The Productivity Puzzle: a Firm-level Investigation into Employment Behaviour and Resource Allocation over the Crisis]," Oxford Economic Papers, Oxford University Press, vol. 74(2), pages 431-452.
    4. Lucy Badalian & Victor Krivorotov, 2011. "Looking for a single root-cause of both crises: the 2008 crisis of derivatives and the unfolding European debt crisis. A new reading of the ricardian law of diminishing returns," Journal of Innovation Economics, De Boeck Université, vol. 0(2), pages 173-199.
    5. Weder, Mark, 2001. "The great demand depression," SFB 373 Discussion Papers 2001,53, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    6. Rockoff, Hugh & White, Eugene N., 2012. "Monetary Regimes and Policy on a Global Scale: The Oeuvre of Michael D. Bordo," MPRA Paper 49672, University Library of Munich, Germany, revised May 2013.
    7. Hart, Robert A., 2019. "Labor Productivity during the Great Depression in UK Manufacturing," IZA Discussion Papers 12379, IZA Network @ LISER.

    More about this item

    Keywords

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913

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