Dynamic General Equilibrium Modeling of Long and Short-Run Historical Events
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.
This paper was written for “The Handbook of Historical Economics,” Alberto Bisin and Giovanni Federico, Editors, Elsevier. We thank Jaeyoung Jang and Greg Clark for very helpful discussions, Greg Clark for providing historical data, Xiaoxia Ye for computational help, and Pedro Brinca and Francesca Loria for advice and for providing us with their Business Cycle Accounting programs. Abhi Vemulapati provided outstanding research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.