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
