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Factor Income Distribution in the United States During the 1920's: A Reexamination of Fact and Theory

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  • Keller, Robert R.
Abstract
The traditional economic history of the 1920's emphasizes the importance of changes in the structure of the American economy. It is argued that three structural changes—monopoly power, technical change, and income distribution—tainted the prosperity of the twenties. The main features of this explanation are easily summarized. Rapid advances in technology reduced the costs of producing output. At the same time corporate monopoly power was increasing thereby restricting the tendency for output prices to fall. In the presence of weak labor unions, the interaction of technical change and monopoly power had the result of increasing “profits” relative to “wages.” The shift in the distribution of income not only favored owners of capital but it also created an imbalance between investment and consumption. Consumption expenditures could not keep pace with investment expenditures and this tendency towards underconsumption, in turn, was one reason for the onset of the Great Depression.

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  • Keller, Robert R., 1973. "Factor Income Distribution in the United States During the 1920's: A Reexamination of Fact and Theory," The Journal of Economic History, Cambridge University Press, vol. 33(1), pages 252-273, March.
    • Handle: RePEc:cup:jechis:v:33:y:1973:i:01:p:252-273_07
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    Cited by:

    1. Albrecht Ritschl & Monique Ebell, 2007. "Real Origins of the Great Depression: Monopoly Power, Unions and the American Business Cycle in the 1920s," 2007 Meeting Papers 712, Society for Economic Dynamics.
    2. Ritschl, Albrecht & Ebell, Monique, 2007. "Real Origins of the Great Depression: Monopolistic Competition, Union Power, and the American Business Cycle in the 1920s," CEPR Discussion Papers 6146, C.E.P.R. Discussion Papers.
    3. Christian Alexander Belabed, 2015. "Income Distribution and the Great Depression," IMK Working Paper 153-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Bengtsson, Erik & Waldenström, Daniel, 2018. "Capital Shares and Income Inequality: Evidence from the Long Run," The Journal of Economic History, Cambridge University Press, vol. 78(3), pages 712-743, September.

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