"Some economists suspect that President Franklin Roosevelt’s “New Deal” cartelization policies, which limited competition in product markets and increased labor bargaining power, kept the economy depressed after 1933. These policies included the National Industrial Recovery Act (NIRA), which suspended antitrust law and permitted collusion in some sectors provided that industry raised wages above market clearing levels and accepted collective bargaining with independent labor unions. ... The recovery from the Great Depression was weak, and was accompanied by significant increases in real wages and prices in several sectors of the economy. A successful theory of the recovery from the Depression should account for persistent low levels of consumption, investment, and employment, the high real wage, and reduced competition in the labor market. We developed a model with New Deal labor and industrial policies that can account for sectoral high wages, a distorted labor market, and depressed employment, consumption, and investment, despite rapid productivity growth.[...] New Deal labor and industrial policies did not lift the economy out of the Depression as Roosevelt had hoped. Instead, the joint policies of increasing labor’s bargaining power and linking collusion with paying high wages prevented a normal recovery by creating rents and an inefficient insider-outsider friction that raised wages significantly and restricted employment. The adoption of these industrial and trade policies not only coincided with the persistence of depression through the late 1930s, but the subsequent abandonment of these policies coincided with the strong economic recovery of the 1940s."