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Technological Change and the Roaring Twenties: A Neoclassical Perspective

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  • Sharon Harrison

    ()
    (Department of Economics, Barnard College, Columbia University)

  • Mark Weder

    ()
    (School of Economics, University of Adelaide)

Abstract

In this paper, we address the causes of the Roaring Twenties in the United States. In particular, we use a version of the real business cycle model to test the hypothesis that an extraordinary pace of productivity growth was the driving factor. Our motivation comes from the abundance of evidence of significant technological progress during this period, fed by innovations in manufacturing and the widespread introduction of electricity. Our estimated total factor productivity series generate artificial model output that shows high conformity with the data: the model economy successfully replicates the boom years from 1922-1929.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2009-29.pdf
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Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2009-29.

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Length: 27 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:adl:wpaper:2009-29

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Postal: Adelaide SA 5005
Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/
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Keywords: real business cycles; Roaring Twenties;

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  1. Field, Alexander J., 2009. "US economic growth in the gilded age," Journal of Macroeconomics, Elsevier, vol. 31(1), pages 173-190, March.
  2. Lee E. Ohanian, 2002. "Why did productivity fall so much during the Great Depression?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr.
  3. Ellen R. McGrattan & Lee E. Ohanian, 2006. "Does Neoclassical Theory Account for the Effects of Big Fiscal Shocks? Evidence From World War II," NBER Working Papers 12130, National Bureau of Economic Research, Inc.
  4. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
  5. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1, octubre-d.
  6. John W. Kendrick, 1973. "Postwar Productivity Trends in the United States, 1948-1969," NBER Books, National Bureau of Economic Research, Inc, number kend73-1, octubre-d.
  7. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
  8. Oshima, Harry T., 1984. "The Growth of U.S. Factor Productivity: The Significance of New Technologies in the Early Decades of the Twentieth Century," The Journal of Economic History, Cambridge University Press, vol. 44(01), pages 161-170, March.
  9. Christopher J. Erceg & Michael D. Bordo & Charles L. Evans, 2000. "Money, Sticky Wages, and the Great Depression," American Economic Review, American Economic Association, vol. 90(5), pages 1447-1463, December.
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  11. Mark Weder, 2004. "The Role of Preference Shocks and Capital Utilization in the Great Depression," CDMA Working Paper Series 200405, Centre for Dynamic Macroeconomic Analysis.
  12. Peter Temin, 2008. "Real Business Cycle Views of the Great Depression and Recent Events: A Review of Timothy J. Kehoe and Edward C. Prescott's Great Depressions of the Twentieth Century," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 669-84, September.
  13. Field, Alexander J., 2006. "Technological Change and U.S. Productivity Growth in the Interwar Years," The Journal of Economic History, Cambridge University Press, vol. 66(01), pages 203-236, March.
  14. Harrison, Sharon G & Weder, Mark, 2002. "Did Sunspot Forces Cause the Great Depression?," CEPR Discussion Papers 3267, C.E.P.R. Discussion Papers.
  15. Bresnahan, Timothy F. & Raff, Daniel M. G., 1991. "Intra-Industry Heterogeneity and the Great Depression: The American Motor Vehicles Industry, 1929–1935," The Journal of Economic History, Cambridge University Press, vol. 51(02), pages 317-331, June.
  16. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  17. Evans, Charles L., 1992. "Productivity shocks and real business cycles," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 191-208, April.
  18. Burnside, C & Eichenbaum, M & Rebelo, S, 1995. "Capital Utilization and Returns to Scale," RCER Working Papers 402, University of Rochester - Center for Economic Research (RCER).
  19. Weir, David R., 1986. "The Reliability of Historical Macroeconomic Data for Comparing Cyclical Stability," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 353-365, June.
  20. Devine, Warren D., 1983. "From Shafts to Wires: Historical Perspective on Electrification," The Journal of Economic History, Cambridge University Press, vol. 43(02), pages 347-372, June.
  21. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  22. Cooley, Thomas F, 1997. "Calibrated Models," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 55-69, Autumn.
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