The Swiss disease: Facts and artefacts.

This paper investigates the claim made by Kehoe and Prescott [2002. Great depressions of the 20th century. Review of Economic Dynamics 5(1), 1-18] that Switzerland and New Zealand experienced “great depressions” in the last two decades. We question the appropriateness of the measure used by Kehoe and Prescott (GDP per working-age person) and propose a more accurate measure to compare economic performance on a consistent basis, namely, GDP per hour worked which is also adjusted for terms of trade changes and investment in intangibles. Based on this yardstick, the difference in economic performance between the US and Switzerland turns out to be largely a statistical artefact and Kehoe and Prescott's conditions for a “great depression” are not satisfied.