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Unemployment and Real Wages in Weimar Germany

Author

Listed:
  • N H Dimsdale

    () (The Queen's College, Oxford)

  • N Horsewood

    (Department of Economics, University of Birmingham)

  • A van Riel

    (Social Policy, Netherlands Economic Institute, Rotterdam)

Abstract

This paper contributes to the debate on the causes of unemployment in interwar Germany. It applies the Layard-Nickell model of the labour market to interwar Germany, using a new quarterly data set. The basic model is extended to capture the effects of the tariff wage under the Weimar Republic and the Nazis. The estimated equations suggest that demand shocks, combined with nominal inertia in the labour market, were important in explaining unemployment. In addition real wage pressures due the political processes of wage determination were a major influence on unemployment. Negative demand shocks appear to have been initially domestic and to have started before the impact of the World Depression. Both negative developments on the demand side of the economy and pressures coming from the supply side raised unemployment in the slump. In the recovery the wage policies of the Nazis and the revival of demand both contributed to the fall in unemployment. The mutual reinforcement of these factors may help to explain the severity of the interwar cycle in Germany. It also serves to emphasize the close connection between political and economic processes in this important episode in macroeconomic history.

Suggested Citation

  • N H Dimsdale & N Horsewood & A van Riel, 2004. "Unemployment and Real Wages in Weimar Germany," Oxford University Economic and Social History Series _056, Economics Group, Nuffield College, University of Oxford.
  • Handle: RePEc:nuf:esohwp:_056
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    File URL: http://www.economics.ox.ac.uk/materials/papers/2292/56dimsdale.pdf
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    Keywords

    Great Depression; Germany; real wages; unemployment;

    JEL classification:

    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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