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Employment, Hours, and Earnings in the Depression: An Analysis of EightManufacturing Industries

  • Ben S. Bernanke

This paper employs monthly, industry-level data in a study of Depression-era labor markets. The underlying analytical framework is one in which, as in Lucas (1970), employers can vary total labor input not only by changing the number of workers but also by varying the length of the work-week. This framework appears to be particularly relevant to the 1930s, a period in which both employment and hours of work fluctuated sharply. With aggregate demand treated as exogenous, it is shown that an econometric model based on this framework, in conjunction with some additional elements (notably, the adjustment of workers' pay to permanent but not transitory variations in the cost of living, and the effects of New Deal legislation) can provide a good explanation of the behavior of the keytime series. In particular, the empirical model is able to explain the puzzle of increasing real wages during a period of high unemployment.

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File URL: http://www.nber.org/papers/w1642.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1642.

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Date of creation: Jun 1985
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Publication status: published as Bernanke, Ben S."Employment, Hours, and Earnings in the Drpression: An Analysis of Eight Manufacturing Industries," American Economic Review, Vol. 76 , No. 1, pp. 82-109, March 1986.
Handle: RePEc:nbr:nberwo:1642
Note: EFG
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  1. Rees, Albert, 1970. "On Equilibrium in Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 306-10, March-Apr.
  2. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  3. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  4. Rosen, Harvey S & Quandt, Richard E, 1978. "Estimation of a Disequilibrium Aggregate Labor Market," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 371-79, August.
  5. Lucas, Robert E, Jr, 1970. "Capacity, Overtime, and Empirical Production Functions," American Economic Review, American Economic Association, vol. 60(2), pages 23-27, May.
  6. Orley Ashenfelter, 1977. "Unemployment as Disequilibrium in a Model of Aggregate Labor Supply," Working Papers 484, Princeton University, Department of Economics, Industrial Relations Section..
  7. Altonji, Joseph G, 1982. "The Intertemporal Substitution Model of Labour Market Fluctuations: An Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 783-824, Special I.
  8. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-44, December.
  9. Lucas, Robert E, Jr & Rapping, Leonard A, 1969. "Real Wages, Employment, and Inflation," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 721-54, Sept./Oct.
  10. Altonji, Joseph & Ashenfelter, Orley, 1980. "Wage Movements and the Labour Market Equilibrium Hypothesis," Economica, London School of Economics and Political Science, vol. 47(187), pages 217-45, August.
  11. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
  12. Plessner, Yakir & Yitzhaki, Shlomo, 1983. "Unemployment and Wage Rigidity: The Demand Side," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 202-12, July.
  13. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
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