Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries

Ben S. Bernanke; Martin L. Parkinson

doi:10.1086/261761

Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries

Ben S. Bernanke^1,2; Martin L. Parkinson³

¹ Federal Reserve · ² Federal Reserve Board of Governors · ³ Government of the State of Michigan - Department of Treasury

Journal of Political Economy 1991 open access

We study the phenomenon of short-run increasing returns to labor (SRIRL) in a sample of 10 interwar U.S. manufacturing industries. Our main findings are that SRIRL was common in the interwar period and that the pattern of SRIRL across industries was similar to that observed in the postwar period. We argue that, since presumably the Depression was not caused by technical regress, these findings are inconsistent with the claim of real business cycle theorists that SRIRL is in general due to procyclical technical shocks. We propose tests for discriminating between two other leading explanations of SRIRL but find that our conclusions differ by industry.

DOI: 10.1086/261761
Volume: 99 (3)
Pages: 439-459
Language: en
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