Real Origins of the Great Depression: Monopoly Power, Unions and the American Business Cycle in the 1920s

If both downturns were caused by workers' improved ability to bargain collectively, then why was the Great Depression so much more severe than its precursor? According to our model, an increase in monopoly power amplifies the impact of collective bargaining on output and employment. Hence, if monopoly power were greater at the onset of the Great Depression than at the onset of the recession of 1920-21, the former would be more severe. Indeed, there is evidence to suggest that monopoly power increased substantially during the Coolidge administration due to weak anti-trust enforcement.