Labour Markets in the Interwar Period and Economic Recovery in the UK and the USA
Timothy J. Hatton
Australian National University (ANU) - School of Economics; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
University of Virginia
CEPR Discussion Paper No. DP7983
We examine the labour market experience of the UK and the US in the recessions of the early 1920s and the early 1930s and the subsequent recoveries. These were deep recessions, comparable to that of 2008-9, but the recoveries were very different. In the UK the recovery of the 1920s was incomplete but that of the 1930s was rather less protracted than in the US. By contrast the US experienced very strong recovery in the 1920s but weaker recovery from the much deeper recession of the 1930s. A key ingredient to understanding these patterns is the interaction between economic shocks and labour market institutions. Here we survey the large literature on interwar labour markets to identify the key elements that underpinned labour market performance. We find that developments in wage setting institutions and in unemployment insurance inhibited a return to full employment in interwar Britain while in the US, New Deal legislation impeded labour market adjustment in the 1930s. We conclude with an assessment of the policy responses to labour market crises in the past and in the present.
Number of Pages in PDF File: 41
Keywords: Great Depression, Labour Markets, Unemployment
JEL Classification: J64, J65, N12, N14working papers series
Date posted: November 14, 2010
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