Here, we focus on the labor wedge. To get a feel for this wedge, look at Figure
1A where we report on US output (relative to trend) and the measured labor wedge
for the Great Depression period (1929–1939). Note that the underlying distortions,
which manifest themselves as labor wedges, became substantially worse from 1929
to 1933 and stayed roughly at this level at least until 1939. Figure 1B displays the
1929–1939 data for US labor, along with the model’s predictions for labor when the
model includes just the labor wedge. Note, here, that the model captures almost all
of the movements in labor. (For more details, see CKM.)