Relative wage setting, contracts and unemployment during the deflations of 1920-22 and 1931-34 in Sweden
Recent research on the Great Depression has concluded that a worldwide decline in aggregate demand, emanating from the United States, was propagated into a fall in real activity through sticky nominal wages. The question remains: Why were nominal wages so sticky? I examine two hypotheses based on relative wage setting. Based on a wide range of evidence for Sweden, I argue that the 1920-22 depression is compatible with the staggered wage contract model and the 1930s depression with the co-ordination failure model.
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|Date of creation:||04 Mar 1999|
|Date of revision:||21 Apr 1999|
|Publication status:||Published in Deflation. Current and historical perspectives., Burdekin, Richard, Siklos, Pierre (eds.), 2004, chapter 4, pages 91-130, Cambridge University Press.|
|Contact details of provider:|| Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden|
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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