The market for labor in interwar Britain

In a previous paper we showed that both the supply and the demand for labor in interwar Britain were wage elastic. In the present paper we extend these efforts by endogenizing wage behavior so that the model provides an account of employment, unemployment, participation, and real wages on an integrated basis. We explain wage behavior in terms of an instantaneously augmented expected Phillips curve in which the natural rate of unemployment depends, inter alia, on unemployment benefit. The paper concludes with a series of counterfactual simulations to expose the factors responsible for the rise and decline of unemployment during the period.