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Did Technology Shocks Drive the Great Depression? Explaining Cyclical Productivity Movements in U.S. Manufacturing, 1919–1939

Published online by Cambridge University Press:  14 November 2011

ROBERT INKLAAR ,
HERMAN DE JONG  and
REITZE GOUMA
ROBERT INKLAAR*
Affiliation:
Assistant Professor, Faculty of Economics and Business, University of Groningen, P.O. Box 800, 9700 AV, Groningen, The Netherlands. E-mails: [email protected].
HERMAN DE JONG*
Affiliation:
Assistant Professor, Faculty of Economics and Business, University of Groningen, P.O. Box 800, 9700 AV, Groningen, The Netherlands. E-mails: [email protected].
REITZE GOUMA*
Affiliation:
Research Assistant, Faculty of Economics and Business, University of Groningen, P.O. Box 800, 9700 AV, Groningen, The Netherlands. E-mails: [email protected].
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Abstract

Technology shocks and declining productivity have been advanced as important factors driving the Great Depression in the United States, based on real business cycle theory. We estimate an improved measure of technology for interwar manufacturing, using data from the U.S. census reports. There is clear evidence of increasing returns to scale and we find no statistical proof that technology shocks led to changes in hours worked or other inputs. This contradicts a key prediction of real business cycle theory. We find that increasing returns to scale are not due to market power but to labor and capital hoarding.

Type
ARTICLES
Information
The Journal of Economic History , Volume 71 , Issue 4 , December 2011 , pp. 827 - 858
Copyright
Copyright © The Economic History Association 2011

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