Supply-Side Policies in the Depression: Evidence from France

73 Pages Posted: 4 Apr 2016 Last revised: 1 Jul 2023

See all articles by Jeremie Cohen-Setton

Jeremie Cohen-Setton

Peterson Institute for International Economics

Joshua Hausman

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy

Johannes Wieland

University of California, San Diego (UCSD) - Department of Economics

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Date Written: March 2016

Abstract

The effects of supply-side policies in depressed economies are controversial. We shed light on this debate using evidence from France in the 1930s. In 1936, France departed from the gold standard and implemented mandatory wage increases and hours restrictions. Deflation ended but output stagnated. We present time-series and cross-sectional evidence that these supply-side policies, in particular the 40-hour law, contributed to French stagflation. These results are inconsistent both with the standard one-sector new Keynesian model and with a medium scale, multi-sector model calibrated to match our cross-sectional estimates. We conclude that the new Keynesian model is a poor guide to the effects of supply-side shocks in depressed economies.

Suggested Citation

Cohen-Setton, Jeremie and Hausman, Joshua and Wieland, Johannes, Supply-Side Policies in the Depression: Evidence from France (March 2016). NBER Working Paper No. w22140, Available at SSRN: https://ssrn.com/abstract=2758488

Jeremie Cohen-Setton (Contact Author)

Peterson Institute for International Economics ( email )

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United States

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Joshua Hausman

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

Johannes Wieland

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

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