Working Paper: NBER ID: w15258
Authors: Lee E. Ohanian
Abstract: Herbert Hoover. I develop a theory of labor market failure for the Depression based on Hoover's industrial labor program that provided industry with protection from unions in return for keeping nominal wages fixed. I find that the theory accounts for much of the depth of the Depression and for the asymmetry of the depression across sectors. The theory also can reconcile why deflation/low nominal spending apparently had such large real effects during the 1930s, but not during other periods of significant deflation.
Keywords: Great Depression; labor market failure; Hoover; wages; unions
JEL Codes: E3; J3; N1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hoover's industrial labor program (J68) | reduction in aggregate output (E23) |
| Hoover's industrial labor program (J68) | reduction in hours worked (J22) |
| Hoover's industrial labor program (J68) | distortion in the industrial labor market (J79) |
| fixed nominal wages + deflation (E31) | high real wages (J39) |
| high real wages (J39) | discouraged hiring (J79) |
| discouraged hiring (J79) | increased unemployment (J65) |
| deflation (E31) | influence on real wages and employment (F66) |