Causes of the Great Recession of 2007-9: The Financial Crisis is the Symptom Not the Disease!

38 Pages Posted: 13 Oct 2009  

Ravi Jagannathan

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER); Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); Indian School of Business (ISB), Hyderabad

Mudit Kapoor

Indian School of Business

Ernst Schaumburg

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: October 2009

Abstract

Globalization has made it possible for labor in developing countries to augment labor in the developed world, without having to relocate, in ways not thought possible only a few decades ago. We argue that this large increase in the developed world's effective labor supply, triggered by geo-political events and technological innovations, coupled with the inability of existing institutions in the US and developing nations themselves to cope with this shock set the stage for the great recession. The financial crisis in the US was but the first acute symptom.

Suggested Citation

Jagannathan, Ravi and Kapoor, Mudit and Schaumburg, Ernst, Causes of the Great Recession of 2007-9: The Financial Crisis is the Symptom Not the Disease! (October 2009). NBER Working Paper No. w15404. Available at SSRN: https://ssrn.com/abstract=1486540

Ravi Jagannathan (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
429 Andersen Hall
Evanston, IL 60208
United States
847-491-8338 (Phone)
847-491-5719 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

Indian School of Business (ISB), Hyderabad ( email )

Hyderabad, Gachibowli 500 019
India

Mudit Kapoor

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

Ernst Schaumburg

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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