Technological Change and the Roaring Twenties: A Neoclassical Perspective

Annualized output growth in the United States was highest during the 1920s, as compared to any other of Fields (2003, 2009) growth cy-cles. This motivates us to 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 pro-ductivity growth was the driving factor. Our motivation comes from the abundance of evidence of signi\u85cant technological progress during this period, fed by innovations in manufacturing and the widespread introduction of electricity. Our estimated total factor productivity se-ries generate arti\u85cial model output that shows high conformity with the data: the model economy successfully replicates the boom years from 1922-1929