Great U.K. Depression: A Puzzle and Possible Resolution.

摘要

This paper asks why the UK had such a large and persistent depression after World War I. We analyze the UK depression using the same neoclassical methodology we developed in our analyses of the U.S. Great Depression (Cole and Ohanian, 1999, 2001a, 2001b). Our analysis suggests that government policies that reduced the incentive to work are almost surely the cause of the UKs 20-year Great Depression. The paper is organized as follows. Section 2 summarizes UK macroeconomic performance during the interwar period. Section 3 assesses the standard monetary/exchange rate explanation for the UKs interwar depression. Section 4 presents a dynamic, general equilibrium model we use to assess the macroeconomic e.ects of the restricted workweek. Section 5 summarizes the quantitative experiments. Section 6 argues that unemployment benefits and the regional concentration of unemployment contributed to the UK interwar depression. Section 7 summarizes the UK unemployment benefits system. Section 8 presents a summary and conclusion.