The Battle of the Plans: A Macroeconometric Model of the Interwar Economy

The Sources of Unemployment: A Simple Econometric Analysis

“…The counterfactual experiments performed in this paper lead to the same conclusion as the earlier ones reported in Valentine (1980)-unemployment can be substantially reduced by a reduction of the real wage. Valentine (1988) also concludes that the employment effects of the depression of the '30s would have been minimised by a policy which related wages to unemployment thereby replicating a market outcome. There is a clear choice between wage flexibility and employment flexibility and the former is likely to create a better social outcome than the latter.…”

Australian Unemployment in the Long Run, 1903-2007*

“…While this would have added only 4 per cent to the average wage, with prices falling, the wage might otherwise have been adjusted downwards in the absence of the award 13 . In this light, it has sometimes been argued that the readjustment of the basic wage froze the real wage at too high a level, adding to unemployment during the 1920s, and making adjustment to the demand shocks of the 1930s all the more difficult (Pope, 1982; Valentine, 1988). Here, we assume a counterfactual where the real wage is adjusted downwards by 15 per cent in 1921 14 .…”

“…16 16 This is less than some estimates. For example, Valentine (1988, p. 168) finds that a sustained 10 per cent wage cut from 1929 to 1930 would have reduced the unemployment rate by an average of four percentage points in the four succeeding years. …”

The Causes of Unemployment in Interwar Australia

“…Equation (7) includes the change in world trade as an additional demand side variable, but this was not found to be statistically significant. The results of 7 Gregory et al (1988a) criticise Valentine's (1988) wage variable for the use of a deflator including export prices. Export prices are included in the TFE deflator, which we use, but the terms of trade variable serves to correct the real wage for changes in the prices of internationally traded goods.…”