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Unemployment Flashcards

1
Q

Mean Ue 1870-1913

A

5.8% (Boyer-Hatton series)

Trend stationary

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2
Q

Mean Ue 1920-38

A

10.5%

Never recovered to 1914 levels, even in recovery from 1921 (Feinstein 1972)

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3
Q

Characterise the types of Ue 1928-29

A

Wholely Ue’d: 70%
Temp. stopped=24%
Casual=6%

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4
Q

Staple industries Ue?

A

Higher throughout interwar compared to other industries (Crafts 2018)

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5
Q

Regional Ue?

A

High in outer Britain: North/Scotland=28% 1932

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6
Q

Long term Ue: 1920s vs 1930s?

A

5-10 in 1920s

25 in 1930s

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7
Q

1920s: Compare UK Ue to other countries

A

Heterogeneity
Low: France, Belgium, USA
High: UK, Germany, Norway

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8
Q

Outline Bargaining model of Ue (labour market)

A

High Ue leads to lower negotiated wages

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8
Q

Outline Bargaining model of Ue (labour market)

A

High Ue leads to lower negotiated wages

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9
Q

Bargaining model of Ue (goods market)

A

High Ue means firms have less pricing power to charge a premium over wages

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10
Q

Bargaining model of Ue (goods market)

A

High Ue means firms have less pricing power to charge a premium over wages

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11
Q

Bargaining model of Ue conclusion?

A

If Ue responsive to state of economy: Low U*

Thus, frictions cause Ue

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12
Q

Pre vs post war National insurance

A

1911: 2.25m workers
1920: 11m workers

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13
Q

Benefits changes interwar?

1911 vs 1925

A

1911: 7 shillings for 15 of 52 weeks at most
1925: 15 shillings for men/12 for women extended indefinitely (1924 act by labour gov)

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14
Q

Were benefits changes monotonic in 1920s?

A

No. 1927: Active burden of proof of job seeking

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15
Q

Union density 1910-20-30?

A

16-48-26

Newman 1991

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16
Q

Trade board coverage 1921?

A

3m workers

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17
Q

How did union membership react to cycles?

A

Roughly cyclical: Depressions lead to loss of jobs and so memberships

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18
Q

How do Benjamin and Kocher (1979) model Ue and benefits?

A

Regression with replacement ratio and deviation from trend output

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19
Q

B and K 1979 conclusion?

A

Insurance system led to 5-8% Ue rise!

‘army of unemployed was a volunteer army’

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20
Q

Problems with B&K?

A
  • Ue not trend stationary so spurious relationship

- Assumption of 2 child family overestimated (B/W): 0.27 vs 0.37 in 1921

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21
Q

Criticisms of BK?

A

Crafts (1987): Regression does not apply to long term Ue
Collins (1982): Disaggregated data by industry removes statistical significance
If you remove the year 1920, it is no longer statistically significant

22
Q

Contemporary accounts: Impact of Benefits on UE

A

None. Bakke (1933) and Unemployment Assistance Board 1938

23
Q

(B/W) for secondary workers?

A

Eichengreen (1987): Significant, but not for household heads

Hatton and Bailey (2002): Controlling for occupation, not significant for any group!

23
(B/W) for secondary workers?
Eichengreen (1987): Significant, but not for household heads | Hatton and Bailey (2002): Controlling for occupation, not significant for any group!
24
One way in which (B/W) may actually have acted?
Encourage temporarily stopped | Hatton and Bailey 2002
25
2 Things misattributed to (B/W) by BK?
- Rising Ue ages 17-23: Wages also rise as age rises, meaning those in unproductive jobs become unprofitable - Those unemployed are less likely to find jobs: Human K destruction?
26
Conclusion on benefits?
No significant impact on Ue rate!
27
Wage rigidity 1920s? | This would support Hatton (2010): Institutional flexibility removes equilibrating forces
High: <30% of wages were adjusted / year Lennard (2021) | But... Not rising compared to pre war (Phillips 1958)
28
Who said Hump shaped Hypothesis?
Calmors and Driffil 1988
29
Industry level bargaining evidence?
Hatton: 60% of employees by mid 1920s | Hatton (2002): Density at 45% 1920 and less than 30% post 1925
30
Does fall in Union membership matter?
Hatton (2002) argues no: collective bargaining underpinned by legislation permanently expanded
31
Attempts to reach fully centralised?
Existed, but failed! National Industrial Conference 1920s Mond-Turner Talks 1927-28
32
Evidence of hump shaped hypothesis?
Very limited: Can't conclude it increased UE at the moment! | Attempts to reach more centralised does support it though!
33
Interaction of benefits and unions?
Hatton (2002) | Benefits as union wage floor around which negotiations were referenced
34
Hours of work shock: how much?
53.8 to 46.7 hours/ week 1913-20
35
RW increase from HoW shock
13% | Broadberry 1986 argues this led to a persisting gap between prod and RW leading to Ue (diagram!)
36
Hours of work shock not too significant?
Eradicated by 1922 if a firm side deflator is used, meaning can't explain Ue
37
Prod. offset of HoW shock?
50-60% in most industries (Scott and Spadavechi 2011)
38
HoW on profit rate?
Solomou: Did lead to a fall in profits (more capital required/ unit of output) Solow Growth Model: investment?
39
HoW shock other countries?
Similar reforms, but unaffected!
40
Demand side Ue explainors 1920s?
Contractionary MP | Moggridge 1972: 750,000 jobs lost due to 1925 overvaluation!
41
Bifurcated LM: Explain the Idea?
Eichengreen and Hatton (1988) | Multiple equilibria depending on your group (LT Ue or ST Ue) as hysteresis and human K destruction!
42
Probabilities of re-employment within 3months 1930s?
Crafts Ue for <3 months p= 0.7 9-12: p=0.2
43
Alternate explanation for Bifurcated LM
Simply sorting. | Solomou argues evidence shows some extent of both
44
Insider-Outsider model 1930s | 2 Assumptions
- Present workforce are not easily replaced | - Insiders do not care about outsiders
45
Insider-Outsider model 1930s | Evidence
Crafts (1989) LTUe up 1% associated with wages up 0.2% Outsiders are unable to apply pressure to bid down wage. Instead, insiders now have greater power!
46
Human K destruction 1930s?
Skill deterioration: Given level of vacancies, fewer matches! Also, effect on job seeking behaviour Crafts: Great Depression led to NRU up 1.5%
47
Capital scrapping 1930s?
Fall in output so Y down so I down so K* down?? | Little evidence for this, with I largely unaffected through GD
48
Demographics 1930s?
1911-38: All pop. increase in >45 age group (Solomou 1996) | Reduced labour mobility so (Glynn and Booth 1983): 60-80% Ue structural!
49
Re-employment probability within 2 weeks based on how long Ue?
Hatton (2004) 2 weeks= 0.35 40 weeks=0.05
50
Another problem with BK?
Solomou: Reverse causality through political pressure! 1932: Drop in benefits was immediately reversed due to lack of popularity (high Ue)
51
B/W causes inflexibility?
Hatton (2010): Back of the queue for benefits if you move area! Benefits impedes migration

History (5 decks)

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