Working Paper: NBER ID: w28090
Authors: Gary D. Hansen; Lee E. Ohanian; Fatih Ozturk
Abstract: We provide quantitative analyses of two striking historical episodes, the timing of the Industrial Revolution in England, and the sources of U.S. economic fluctuations between 1889-1929. Applying data from 1245-1845 within the “Malthus to Solow” framework shows that the timing of the Industrial Revolution reflects a subtle interplay between large changes in TFP and deaths from plagues. We find that U.S. economic fluctuations, including the Panics of 1893 and 1907, were driven primarily by volatile TFP, and that growth during the “Roaring Twenties” should have been even stronger, reflecting a large labor wedge that emerged around World War I.
Keywords: Dynamic General Equilibrium; Historical Economics; Total Factor Productivity; Economic Fluctuations
JEL Codes: E0; N1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| The timing of the industrial revolution in England (N13) | changes in total factor productivity (TFP) (O49) |
| changes in total factor productivity (TFP) (O49) | transition from Malthusian stagnation to modern growth (O41) |
| The timing of the industrial revolution in England (N13) | mortality rates from plagues (N93) |
| US economic fluctuations from 1889 to 1929 (N12) | volatile TFP (F16) |
| volatile TFP (F16) | economic fluctuations during significant events like the panics of 1893 and 1907 (N11) |
| Technological shocks (O33) | US economic fluctuations from 1889 to 1929 (N12) |
| Labor wedge around World War I (J39) | depressed growth during the 1920s (N12) |