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On the Way to the Great Depression, The Demand Regime of the US Economy (1900-1929)

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  • Ahmad A. Borazan

Abstract

It has become commonplace to raise the analogy between the recent experience of the dynamics of income distribution and growth, and that of the era before the Great Depression. However, no study of the demand regime has been done for the early twentieth century period; this study attempts to fill that gap in the literature. Based on a Kaldroian model, I estimate whether the demand regime of the pre-Great Depression era for private domestic output was wage-led or debt-led. The results of the study show the demand regime was wage-led with a considerable role of private debt in driving aggregate demand. Furthermore, I discuss the Roaring Twenties period and argue that increased income inequality led to the rise of destabilizing channels that propped up demand which contributed to increasing economic fragility on the way to the Great Depression.

Suggested Citation

  • Ahmad A. Borazan, 2015. "On the Way to the Great Depression, The Demand Regime of the US Economy (1900-1929)," Working Paper Series, Department of Economics, University of Utah 2015_02, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2015_02
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    More about this item

    Keywords

    : Income distribution; Demand regime; Debt-led growth; Wage-led growth; Private debt; Great Depression; Roaring Twenties JEL Classification: E12; E22; D3;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • D3 - Microeconomics - - Distribution

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