Discussion paper

DP17018 Sticky Wages and the Great Depression: Evidence from the United Kingdom

How sticky were wages during the Great Depression? Although classic accounts emphasize the importance of nominal rigidity in amplifying deflationary shocks, the evidence is limited. In this paper, I calculate the degree of nominal wage rigidity in the United Kingdom between the wars using new granular data covering millions of wages. I find that nominal wages were more flexible downwards than in most modern economies, but that the frequency and magnitude of wage cuts were too low to fully offset deflation.

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Citation

Lennard, J (2022), “DP17018 Sticky Wages and the Great Depression: Evidence from the United Kingdom”, CEPR Press Discussion Paper No. 17018. https://cepr.org/publications/dp17018