Working Paper: CEPR ID: DP4429
Authors: Albrecht Ritschl
Abstract: A substantial body of research agrees that unit wage cost in the industrialized economies increased substantially after World War I. For Germany, the popular industrial output estimates of Hoffmann (1965) are partly based on the assumption of constant wage shares, and show rather high growth of the German inter-war economy relative to 1913. This Paper constructs alternative estimates for the affected metal-working sectors, and finds far lower output levels and growth. The change is strong enough to remove the growth bias also from Hoffmann?s figures of overall industry and the aggregate economy. After correcting for spurious growth in metal-processing industry, Hoffmann?s output estimates are broadly in line with the contemporary output and national income statistics.
Keywords: Index of production; Wage cost
JEL Codes: N14; N64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage shares (D33) | output estimates (E23) |
| Hoffmann's estimates (C13) | observed growth (O40) |
| constant wage shares assumption (D33) | spurious growth (O41) |
| employment and wage data (J39) | output estimates (E23) |