Working Papers, Department of Economics, Lund University
Relative wage setting, contracts and unemployment during the deflations of 1920-22 and 1931-34 in Sweden
Abstract: Recent research on the Great Depression has concluded that
a worldwide decline in aggregate demand, emanating from the United States,
was propagated into a fall in real activity through sticky nominal wages.
The question remains: Why were nominal wages so sticky? I examine two
hypotheses based on relative wage setting. Based on a wide range of
evidence for Sweden, I argue that the 1920-22 depression is compatible with
the staggered wage contract model and the 1930s depression with the
co-ordination failure model.
Keywords: Wage contracts; Fischer-Taylor model; unemployment; Sweden; Depression; relative wage setting; (follow links to similar papers)
JEL-Codes: E31; E32; E65; (follow links to similar papers)
43 pages, March 4, 1999, Revised April 21, 1999
- This paper is published as:
Fregert, Klas and Lars Jonung, (2004), 'Deflation dynamics in Sweden: Perceptions, expectations, and adjustmnet during the deflations of 1921-1923 and 1931-1933.' in Burdekin, Richard and Pierre Siklos (eds.) Deflation. Current and historical perspectives., chapter 4, pages 91-130, Cambridge University Press.
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