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Efficiency, Distortions and Factor Utilization during the Interwar Period

Otsu, Keisuke and Klein, Alexander (2013) Efficiency, Distortions and Factor Utilization during the Interwar Period. Discussion paper. University of Kent School of Economics Discussion Papers

Abstract

In this paper, we analyze the International Great Depression in the US and Western Europe using the business cycle accounting method a la Chari, Kehoe and McGrattan (CKM 2007). We extend the business cycle accounting model by incorporating endogenous factor utilization which turns out to be an important transmission mechanism of the disturbances in the economy. Our main findings are that in the US labor wedges account for roughly half of the drop in output while efficiency and investment wedges each account for a quarter of it during the 1929-1933 period while in Western Europe labor wedges account for more than one-third of the output drop and efficiency, government and investment wedges are responsible for the remaining during the 1929-1932 period. Our findings are consistent with several strands of existing descriptive and empirical literature on the International Great Depression.

Item Type: Monograph (Discussion paper)
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: K. Otsu
Date Deposited: 15 Nov 2014 21:52 UTC
Last Modified: 06 Feb 2020 04:10 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/44639 (The current URI for this page, for reference purposes)
Klein, Alexander: https://orcid.org/0000-0001-9026-3389
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