We analyze the italian economy in the interwar years and show that the great depression represented a major slodown in economic activity. We argue that the slowdown cannot be explained solely by productivity shocks and that other factors must have contributed to the depth and duration of the the 1929 depression. We present a model in which trade restrictions together which wage rigidities produce a slowdown  in economic activity that is consistent with the one observed in the data. The model is also consistent with evidence from sectoral disaggregated data.