Between 1929 and 1933, real output per adult fell over 30 percent and total factor productivity fell 18 percent. This productivity decrease is much larger than expected from just extrapolating the productivity decrease that typically occurs during recessions. This paper evaluates what factors may have caused this large decrease, including unmeasured factor utilization, changes in the composition of production, and increasing returns. I find that these factors combined explain less than one-third of the 18 percent decrease, and I conclude that the productivity decrease during the Great Depression remains a puzzle.
Published in: _Quarterly Review_ (Vol. 26, No. 2, Spring 2002, pp. 12-17) https://doi.org/10.21034/qr.2622.
Published in: _American Economic Review_ (Vol. 91, No. 2, May 2001, pp. 34-38) https://doi.org/10.1257/aer.91.2.34.