Wages, productivity, and work intensity in the Great Depression

We show that U.S. manufacturing wages during the Great Depression were importantly determined by forces on firms' intensive margins. Short-run changes in work intensity and the longer-term influence of potential productivity combined to influence real wage growth. By contrast, the external effects of unemployment and replacement rates had much less impact. Empirical work is undertaken against the background of a simple efficient bargaining model that embraces earnings, employment, hours of work and work intensity. JEL Classification: J24, J31, N62 Acknowledgements: We are grateful to two anonymous referess, Dan Anderberg, George Johnson, and Campbell Leith for helpful comments. We also thank Ben Bernanke for access to the data used in this project. * Corresponding author: Department of Economics, University of Strathclyde, 130 Rottenrow, Glasgow, G4 0GE, Scotland, U.K.