Labor Productivity During the Great Depression

15 Pages Posted: 8 Jun 2004 Last revised: 27 Jul 2010

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Charles L. Evans

Federal Reserve Bank of Chicago - Research Department

Date Written: August 1993

Abstract

In a recent paper, Bemanke and Parkinson (1991) studied interwar U.S. manufacturing data with the objective of assessing competing theories of the business cycle. An important finding was that short-run increasing returns to Labor (SRIRL), or procyclical labor productivity, was at least as strong during the Great Depression as in the postwar period. The authors conclude that this information casts further doubt on the real business cycle explanation of economic fluctuations. The purpose of this note is to point out that, within the data set analyzed by Bemanke and Parkinson (20% of the manufacturing sector), labor productivity during the Great Depression (1928:III to 1933:1) was procyclical in some industries and countercyclical in others. Furthermore, our measure of labor productivity for the entire manufacturing sector during this period was countercyclical. We conclude that the evidence is not favorable toward the hypothesis that large, negative aggregate demand shocks pushed the 1929-33 economy down a static, neoclassical production function. Another possibility is that firms which typically hoarded labor during recessions chose not to do so during the 1929-33 period.

Suggested Citation

Bordo, Michael D. and Evans, Charles L., Labor Productivity During the Great Depression (August 1993). NBER Working Paper No. w4415. Available at SSRN: https://ssrn.com/abstract=324041

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Charles L. Evans

Federal Reserve Bank of Chicago - Research Department ( email )

230 South LaSalle Street
P.O. Box 834
Chicago, IL 60604-1413
United States
312-322-5812 (Phone)
312-322-2357 (Fax)

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