Technological change and the roaring twenties: A neoclassical perspective

This paper addresses 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 to 1929.