Long waves of economic development and the diffusion of general-purpose technologies: The case of railway networks

The possible existence of long waves in economic time series has long been an important subject of debate for economists, statisticians and historians. Recent empirical evidence for these long-term fluctuations is found in the literature of structural time series models. One empirical method for detecting long waves which seems to be particularly compatible with their theoretical explanation is the band pass filter. Applying the band pass filter to data from six European countries demonstrates the presence of wave-like fluctuations with a length of between 30 and 50 years. Their turning points show quite strong similarities across the six countries examined. Moreover, there is evidence for a stable lead-lag structure for two countries. The dominant theoretical explanation for long waves stresses the diffusion of general-purpose technologies. The diffusion of the railway system as one example of a general-purpose technology was analysed by means of logistic regression. The results are quite striking, as there seems to be evidence for a temporal sequence, implying that the turning points of railway diffusion occurred before the turning points of long waves.