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January 29, 2010 | History

Real origins of the Great Depression 1 edition

Real origins of the Great Depression
Monique Ebell

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Real origins of the Great Depression
monopoly power, unions and the American business cycle in the 1920s
Monique Ebell and Albrecht Ritschl.

Published 2008 by Centre for Economic Performance, London School of Economics and Political Science in London .
Written in English.

About the Book

We attempt to explain the severe 1920-21 recession, the roaring 1920s boom, and the slide into the Great Depression after 1929 in a unified framework. The model combines monopolistic product market competition with search frictions in the labor market, allowing for both individual and collective wage bargaining. We attribute the extraordinary macroeconomic and financial volatility of this period to two factors: Shifts in the wage bargaining regime and in the degree of monopoly power in the economy. A shift from individual to collective bargaining presents as a recession, involving declines in output and asset values, and increases in unemployment and real wages. The pro-union provisions of the Clayton Act of 1914 facilitated the rise of collective bargaining after World War I, leading to the asset price crash and recession of 1920-21. A series of tough anti-union Supreme Court decisions in late 1921 induced a shift back to individual bargaining, leading the economy out of the recession. This, coupled with the lax anti-trust enforcement of the Coolidge and Hoover administrations enabled a major rise in corporate profits and stock market valuations throughout the 1920s. Landmark pro-union court decisions in the late 1920s, as well as political pressure on firms to adopt the welfare capitalism model of high wages, led to collapsing profit expectations, contributing substantially to the stock market crash. We model the onset of the Great Depression as an equilibrium switch from individual wage bargaining to (actual or mimicked) collective wage bargaining. The general equilibrium effects of this regime change are consistent with large decreases in output, employment, and stock prices and moderate increases in real wages.

Edition Notes

Title from PDF file (viewed on Oct. 10, 2008).

"June 2008."

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.

Series
CEP discussion paper -- no. 876

Classifications

Library of Congress
HC10

The Physical Object

Format
Electronic resource

ID Numbers

Open Library
OL22649242M
LC Control Number
2008613840

History

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January 29, 2010 Edited by WorkBot add more information to works
December 11, 2009 Created by WorkBot add works page