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Why did the National Industrial Recovery Act fail?

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  • Bernard C. Beaudreau

Abstract

The National Industrial Recovery Act purportedly failed because it raised real wages and lowered employment. Beaudreau on the other hand argued that it should be seen as a policy response to technological change-based excess capacity and insufficient purchasing power. However, if wages lagged behind productivity growth, why did the National Industrial Recovery Act fail to increase employment and output? This article shows that the chosen policy instruments (e.g., Codes of Fair Competition and the President's Reemployment Agreement), and not the objectives, were among the causes of its demise. Across-the-board wage increases in the presence of firm and industry heterogeneity contributed to its demise.

Suggested Citation

  • Bernard C. Beaudreau, 2016. "Why did the National Industrial Recovery Act fail?," European Review of Economic History, European Historical Economics Society, vol. 20(1), pages 79-101.
    • Handle: RePEc:oup:ereveh:v:20:y:2016:i:1:p:79-101.
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    References listed on IDEAS

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