What - or Who - Started the Great Depression?
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.
Published Versions
Ohanian, Lee E., 2009.
"What - or who - started the great depression?,"
Journal of Economic Theory,
Elsevier, vol. 144(6), pages 2310-2335, November.
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