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Technology Shocks and the Great Depression

  • Shingo Watanabe (a1)


Standard productivity measures indicate large fluctuations in technology during the Great Depression. This article's historical technology series (1892–1966), controlled for aggregation effects, varying input utilization, non-constant returns, and imperfect competition, does not indicate technology regress such that could trigger the downturn. In contrast, technology improvements in the recovery were so rapid that, over the whole Great Depression period, technology growth was highest among pre-WWII decades. This article also finds that output changed little and inputs fell when technology improved in the pre-WWII period. Real-business-cycle models have difficulty in explaining pre-WWII business cycles characterized by such responses.



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This article is a substantially revised version of the second chapter of my doctoral dissertation submitted to the University of Michigan. I am grateful to my primary advisor, Miles Kimball, for his help, advice, and encouragement. Thanks to the anonymous referees, Ruediger Bachman, Tyler Shumway, and Dmitriy Stolyarov. All remaining errors are my own. The opinions expressed in this article are my own and do not necessarily reflect those of the Bank of Japan.



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