IDEAS home Printed from https://ideas.repec.org/p/adl/wpaper/2009-29.html
   My bibliography  Save this paper

Technological Change and the Roaring Twenties: A Neoclassical Perspective

Author

Listed:
  • 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.

Suggested Citation

  • Sharon Harrison & Mark Weder, 2009. "Technological Change and the Roaring Twenties: A Neoclassical Perspective," School of Economics and Public Policy Working Papers 2009-29, University of Adelaide, School of Economics and Public Policy.
  • Handle: RePEc:adl:wpaper:2009-29
    as

    Download full text from publisher

    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2009-29.pdf
    File Function: 2009
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mark Weder, 2006. "The Role Of Preference Shocks And Capital Utilization In The Great Depression," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1247-1268, November.
    2. 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.
    3. 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 669-684, September.
    4. Harrison, Sharon G. & Weder, Mark, 2006. "Did sunspot forces cause the Great Depression?," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1327-1339, October.
    5. Romer, Christina D, 1989. "The Prewar Business Cycle Reconsidered: New Estimates of Gross National Product, 1869-1908," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 1-37, February.
    6. Ellen R. M cG rattan & Lee E. Ohanian, 2010. "Does Neoclassical Theory Account For The Effects Of Big Fiscal Shocks? Evidence From World War Ii," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 509-532, May.
    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 402-417, June.
    8. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital Utilization and Returns to Scale," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 67-124, National Bureau of Economic Research, Inc.
    9. Lee E. Ohanian, 2002. "Why did productivity fall so much during the Great Depression?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 26(Spr).
    10. Devine, Warren D., 1983. "From Shafts to Wires: Historical Perspective on Electrification," The Journal of Economic History, Cambridge University Press, vol. 43(2), pages 347-372, June.
    11. 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.
    12. 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(2), pages 317-331, June.
    13. Committee on Recent Economic Changes, 1929. "Recent Economic Changes in the United States, Volumes 1 and 2," NBER Books, National Bureau of Economic Research, Inc, number comm29-1, February.
    14. 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.
    15. Evans, Charles L., 1992. "Productivity shocks and real business cycles," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 191-208, April.
    16. Weir, David R., 1986. "The Reliability of Historical Macroeconomic Data for Comparing Cyclical Stability," The Journal of Economic History, Cambridge University Press, vol. 46(2), pages 353-365, June.
    17. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1, February.
    18. Cooley, Thomas F, 1997. "Calibrated Models," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 55-69, Autumn.
    19. Mark Weder, 2006. "The Role Of Preference Shocks And Capital Utilization In The Great Depression," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1247-1268, November.
    20. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 10(Fall), pages 23-27.
    21. Field, Alexander J., 2009. "US economic growth in the gilded age," Journal of Macroeconomics, Elsevier, vol. 31(1), pages 173-190, March.
    22. 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, vol. 23(Win), pages 2-24.
    23. Ellen R. McGrattan, 2006. "Real business cycles," Staff Report 370, Federal Reserve Bank of Minneapolis.
    24. 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(1), pages 203-236, March.
    25. Alexander J. Field, 2003. "The Most Technologically Progressive Decade of the Century," American Economic Review, American Economic Association, vol. 93(4), pages 1399-1413, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jiang, Dou & Weder, Mark, 2021. "American business cycles 1889–1913: An accounting approach," Journal of Macroeconomics, Elsevier, vol. 67(C).
    2. Mark Weder, 2010. "Economic Crisis and Economic Theory," The Economic Record, The Economic Society of Australia, vol. 86(s1), pages 7-12, September.
    3. Peter A.G. van Bergeijk, 2019. "Deglobalization 2.0," Books, Edward Elgar Publishing, number 18560.
    4. Hajkowicz, Stefan & Sanderson, Conrad & Karimi, Sarvnaz & Bratanova, Alexandra & Naughtin, Claire, 2023. "Artificial intelligence adoption in the physical sciences, natural sciences, life sciences, social sciences and the arts and humanities: A bibliometric analysis of research publications from 1960-2021," Technology in Society, Elsevier, vol. 74(C).
    5. Kim Ristolainen & Tomi Roukka & Henri Nyberg, 2021. "A Thousand Words Tell More Than Just Numbers: Financial Crises and Historical Headlines," Discussion Papers 149, Aboa Centre for Economics.
    6. Hajkowicz, Stefan & Naughtin, Claire & Sanderson, Conrad & Schleiger, Emma & Karimi, Sarvnaz & Bratanova, Alexandra & Bednarz, Tomasz, 2022. "Artificial intelligence for science – adoption trends and future development pathways," MPRA Paper 115464, University Library of Munich, Germany.
    7. Ristolainen, Kim & Roukka, Tomi & Nyberg, Henri, 2024. "A thousand words tell more than just numbers: Financial crises and historical headlines," Journal of Financial Stability, Elsevier, vol. 70(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Harrison, Sharon & Weder, Mark, 2009. "Technological change and the roaring twenties: A neoclassical perspective," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 363-375, September.
    2. Luca Pensieroso, 2007. "Real Business Cycle Models Of The Great Depression: A Critical Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 110-142, February.
    3. Hansen, G.D. & Ohanian, L.E., 2016. "Neoclassical Models in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2043-2130, Elsevier.
    4. Alexopoulos, Michelle & Cohen, Jon, 2009. "Measuring our ignorance, one book at a time: New indicators of technological change, 1909-1949," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 450-470, May.
    5. Weder, Mark, 2001. "The Great Demand Depression," CEPR Discussion Papers 3067, C.E.P.R. Discussion Papers.
    6. Mark Weder, 2006. "The Role Of Preference Shocks And Capital Utilization In The Great Depression," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1247-1268, November.
    7. Klein, Alexander & Otsuy, Keisuke, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," CAGE Online Working Paper Series 147, Competitive Advantage in the Global Economy (CAGE).
    8. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    9. Fabien Tripier, 2009. "Elasticity of factor substitution and the rise in labor's share of income during the Great Depression," Working Papers hal-00419343, HAL.
    10. Alex Klein & Keisuke Otsu, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," Studies in Economics 1317, School of Economics, University of Kent.
    11. Michelle Alexopoulos, 2007. "Believe it or not! The 1930s was a technologically progressive decade," 2007 Meeting Papers 195, Society for Economic Dynamics.
    12. Franck Portier, 2008. "Interprétation d'épisodes historiques à l'aide de modèles dynamiques stochastiques d'équilibre général," Economie & Prévision, La Documentation Française, vol. 0(4), pages 33-46.
    13. Jiang, Dou & Weder, Mark, 2021. "American business cycles 1889–1913: An accounting approach," Journal of Macroeconomics, Elsevier, vol. 67(C).
    14. Özer Karagedikli & Troy Matheson & Christie Smith & Shaun P. Vahey, 2010. "RBCs AND DSGEs: THE COMPUTATIONAL APPROACH TO BUSINESS CYCLE THEORY AND EVIDENCE," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 113-136, February.
    15. Pedro Amaral & James C. MacGee, 2002. "The Great Depression in Canada and the United States: A Neoclassical Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 45-72, January.
    16. Luca Pensieroso, 2011. "Real business cycle models of the Great Depression," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(2), pages 101-119, June.
    17. Wen Yi, 2004. "What Does It Take to Explain Procyclical Productivity?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-40, June.
    18. Gabriel P. Mathy, 2020. "How much did uncertainty shocks matter in the Great Depression?," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 14(2), pages 283-323, May.
    19. Chin Alycia & Warusawitharana Missaka, 2010. "Financial Market Shocks during the Great Depression," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-27, September.
    20. Charles W. Calomiris & Christopher Hanes, 1994. "Historical Macroeconomics and American Macroeconomic History," NBER Working Papers 4935, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    real business cycles; Roaring Twenties;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:adl:wpaper:2009-29. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Qazi Haque (email available below). General contact details of provider: https://edirc.repec.org/data/decadau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.