Hostname: page-component-7c8c6479df-r7xzm Total loading time: 0 Render date: 2024-03-29T07:28:28.978Z Has data issue: false hasContentIssue false

Britain's Productivity Gap with the United States and Europe: A Historical Perspective

Published online by Cambridge University Press:  26 March 2020

Stephen Broadberry*
Affiliation:
Department of Economics, University of Warwick, CoventryCV4 7AL
Mary O'Mahony*
Affiliation:
National Institute of Economic and Social Research

Abstract

Since the mid-1990s, an almost universal belief has developed amongst economic commentators that the United States has undergone a productivity miracle and that European economies are now suffering from chronic sclerosis. As a result, the ‘American model’ dominates the agenda of policy towards growth and productivity performance in Britain. This paper urges caution here, given the disappointing experience of earlier British growth policies based on borrowing from the fashionable economy of the moment, including the Japanese and German economies during the 1970s and 1980s, and the American economy (again) during the 1950s and 1960s. A historical perspective suggests that: (1) successful productivity performance requires a stable institutional framework for long-term investments in human and physical capital, which the European model has been particularly good at providing over the last half century; (2) a country is constrained by its geography, so that copying without adaptation to local circumstances is rarely a good policy; (3) it is important to pay attention to the different sectors of the economy when formulating policy.

Type
Articles
Copyright
Copyright © 2004 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The authors would like to acknowledge the support of the ESRC/EPSRC Advanced Institute of Management Research (AIM) under grant number RES-331-25-0009 for this research, and the comments of Nick Crafts on an earlier draft. Remaining errors are our responsibility.

References

Ames, E. and Rosenberg, N. (1968), ‘The Enfield Arsenal in theory and history’, Economic Journal, 78, pp. 827842.CrossRefGoogle Scholar
Atkinson, A.B. and Stiglitz, J.E. (1969), ‘A new view of technological change’, Economic Journal, 79, pp. 573578.CrossRefGoogle Scholar
Baily, M.N. and Chakrabarti, A.K. (1988), Innovation and the Productivity Crisis, Washington DC, Brookings Institution.Google Scholar
Baily, M.N. and Kirkegaard, J.F. (2004), Transforming the European Economy, Washington, Institute for International Economics (forthcoming).Google Scholar
Barjot, D. (ed.) (2002), Catching up with America: Productivity Missions and the Diffusion of American Economic and Technological Influence after the Second World War, Paris, Presses de l'Université de Paris-Sorbonne.Google Scholar
Barnes, M. (2004), ‘International comparisons of productivity: better data improve UK productivity position’, Office for National Statitics, www.statistics.gov.uk/articles/nojournal/Feb_ICP.pdf.Google Scholar
Basu, S., Fernald, J.G., Oulton, N. and Srinivasan, S. (2003), ‘The case of the missing productivity growth: or, does information technology explain why productivity accelerated in the United States but not in the United Kingdom’, NBER Macroeconomics Annual, 18.CrossRefGoogle Scholar
Blundell, R., Griffiths, R. and van Reenan, J. (1999), ‘Market share, market valuation and innovation in a panel of British manufacturing firms’, Review of Economic Studies, 66, pp. 529554.CrossRefGoogle Scholar
Bresnahan, T., Brynjolfsson, E. and Hitt, L. (2002), ‘Information technology, workplace organization and the demand for skilled labor: firm-level evidence’, Quarterly Journal of Economics, 117, pp. 339376.CrossRefGoogle Scholar
Bresnahan, T. and Trajtenberg, M. (1995), ‘General purpose technologies: engines of growth?’, Journal of Econometrics, 65, pp. 83108.CrossRefGoogle Scholar
Broadberry, S.N. (1993), ‘Manufacturing and the convergence hypothesis: what the long-run data show’, Journal of Economic History, 53, pp. 772795.CrossRefGoogle Scholar
Broadberry, S.N. (1997a), The Productivity Race: British Manufacturing in International Perspective, 1850-1990, Cambridge, Cambridge University Press.CrossRefGoogle Scholar
Broadberry, S.N. (1997b), ‘Forging ahead, falling behind and catching-up: a sectoral analysis of Anglo-American productivity differences, 1870-1990’, Research in Economic History, 17, pp. 137.Google Scholar
Broadberry, S.N. (1997c), ‘Anglo-German productivity differences 1870-1990: a sectoral analysis’, European Review of Economic History, 1, pp. 247267.CrossRefGoogle Scholar
Broadberry, S.N. (1998), ‘How did the United States and Germany overtake Britain? A sectoral analysis of comparative productivity levels, 1870-1990’, Journal of Economic History, 58, pp. 375407.CrossRefGoogle Scholar
Broadberry, S.N. (2003), ‘Human capital and productivity performance: Britain, the United States and Germany, 1870-1990’, in David, P.A. and Thomas, M. (eds), The Economic Future in Historical Perspective, Oxford, Oxford University Press, pp. 103133.Google Scholar
Broadberry, S.N. (2004a), ‘The performance of manufacturing’, in Floud, R. and Johnson, P. (eds.), The Cambridge Economic History of Modern Britain, Volume 3: Structural Change, 1939-1999, Cambridge, Cambridge University Press, pp. 5783.CrossRefGoogle Scholar
Broadberry, S.N. (2004b), ‘Explaining Anglo-German productivity differences in services since 1870’, European Review of Economic History, 8, (forthcoming).CrossRefGoogle Scholar
Broadberry, S.N. and Crafts, N.F.R. (2003), ‘UK productivity performance from 1950 to 1979: a restatement of the Broadberry-Crafts View’, Economic History Review, 56, pp. 718735.CrossRefGoogle Scholar
Broadberry, S.N. and Ghosal, S. (2002), ‘From the counting house to the modern office: explaining Anglo-American productivity differences in services, 1870-1990’, Journal of Economic History, 62, pp. 967998.CrossRefGoogle Scholar
Broadberry, S.N. and Wagner, K. (1996), ‘Human capital and productivity in manufacturing during the twentieth century: Britain, Germany and the United States’, in Crafts, N.F.R. and van Ark, B. (eds), Quantitative Aspects of Postwar European Economic Growth, Cambridge, Cambridge University Press, pp. 244270.Google Scholar
Brynjolfsson, E. and Hitt, L. (1996), ‘Paradox lost? Firm-level evidence on the returns to information systems’, Management Science, 42, pp. 541558.CrossRefGoogle Scholar
Brynjolfsson, E. and Hitt, L. (2000), ‘Beyond computation: information technology, organizational transformation and business performance’, Journal of Economic Perspectives, 14, pp. 2348.CrossRefGoogle Scholar
Carlin, W. (1996), ‘West German growth and institutions, 1945-90’, in Crafts, N.F.R. and Toniolo, G. (eds), Economic Growth in Europe Since 1945, Cambridge, Cambridge University Press, pp. 455497.CrossRefGoogle Scholar
Cette, G., Mairesse, J. and Kocoglu, Y. (2002), ‘Croissance économique et diffusion des TIC: le cas de la France sur longue période (1980-2000)’, Revue Française d’Économie, 16, pp. 155192.CrossRefGoogle Scholar
Channon, D.F. (1973), The Strategy and Structure of British Enterprise, London, Macmillan.CrossRefGoogle Scholar
Colecchia, A. and Schreyer, P. (2001), ‘ICT investment and economic growth in the 1990s: is the United States a unique case?’, Paris, OECD.Google Scholar
Committee of Public Accounts (2002), ‘New IT systems for magistrates’ courts: the Libra Project’, Treasury Minutes of the Forty-third to the Forty-sixth Reports for the Committee of Public Accounts 2001-02, Cm5393, London, HMSO.Google Scholar
Committee of Public Accounts (2004), ‘The cancellation of the Benefits Payment Card’, Treasury Minutes of the First to Third Reports for the Committee of Public Accounts 2002-03, Cm6105, London, HMSO.Google Scholar
Cowling, K., Stoneman, P., Cubbin, J., Cable, J, Hall, G., Domberger, S. and Dutton, P. (1980), Mergers and Economic Performance, Cambridge, Cambridge University Press.Google Scholar
Crafts, N.F.R. (2004), ‘Fifty years of economic growth in Western Europe: no longer catching up but falling behind?’, World Economics, 5, pp. 131145.Google Scholar
David, P.A. (1975), Technical Choice, Innovation and Economic Growth, Cambridge, Cambridge University Press.Google Scholar
Denison, E.P (1967), Why Growth Rates Differ: Postwar Experience in Nine Western Countries, Washington DC, Brookings Institution.Google Scholar
Dertouzos, M.L., Lester, R.K., Solow, R.M. and the MIT Commission on Industrial Productivity (1989), Made in America: Regaining the Productive Edge, Cambridge MA., MIT Press.Google Scholar
Dore, R. (2000), Stock Market Capitalism: Welfare Capitalism. Japan and Germany versus the Anglo-Saxons, Oxford, Oxford University Press.CrossRefGoogle Scholar
Dyas, G.P. and Thanheiser, H.T. (1976), The Emerging European Enterprise, London, Macmillan.CrossRefGoogle Scholar
Edquist, C. and Jacobsson, S. (1988), Flexible Automation: The Global Diffusion of Technology in the Engineering Industry, Oxford, Blackwell.Google Scholar
Field, A.J. (2004), ‘US productivity growth in the interwar period and the 1990s’, http://www.unc.edu/depts/econ/seminars/Field.pdf.Google Scholar
Freeman, C. (1987), Technology Policy and Economic Performance: Lessons from Japan, London, Pinter.Google Scholar
Groningen Growth and Development Centre and The Conference Board (2004), ‘Total economy database’, http://www.ggdc.net.Google Scholar
Gust, C. and Marquez, J. (2002), ‘International comparisons of productivity growth: the role of information technology and regulatory practices’, Board of Governors of the Federal Reserve System International Finance Discussion Paper No.727.Google Scholar
Habakkuk, H.J. (1962), American and British Technology in the Nineteenth Century, Cambridge, Cambridge University Press.Google Scholar
Helpman, E. (ed.) (1998), General Purpose Technologies and Economic Growth, Cambridge, MA., MIT Press.Google Scholar
HM Treasury (2000), Productivity in the UK: The Evidence and the Government's Approach, London, HMSO (www.hm-treasury.gov.uk).Google Scholar
Hutton, G. (1953), We Too Can Prosper, London, Allen & Unwin.Google Scholar
Inklaar, R., O'Mahony, M, and Timmer, M. (2003), ‘ICT and Europe's productivity performance: industry-level growth accounting comparisons with the United States’, Groningen Growth and Development Centre, Research Memorandum GD-68.Google Scholar
Jarvis, V. and Prais, S.J. (1989), ‘Two nations of shopkeepers: training for retailing in France and Britain’, National Institute Economic Review, 128, pp. 5874.CrossRefGoogle Scholar
Jorgenson, D. W. and Stiroh, K (2000), ‘Raising the speed limit: U.S. economic growth in the information age’, Brookings Papers on Economic Activity, 1, pp. 125211.CrossRefGoogle Scholar
Layard, R. (2003), ‘Happiness: has social science a clue?’, Lionel Robbins Memorial Lectures, London School of Economics, http://cep.lse.ac.uk/layard/.Google Scholar
McKinsey Global Institute (1998), Driving Productivity and Growth in the UK, available at http://www.mckinsey.com/.Google Scholar
McKinsey Global Institute (2002), US Productivity Growth 1995-2000, summary available at http://www.mckinsey.com/.Google Scholar
Maddison, A. (1995), Monitoring the World Economy, 1820-1992, Paris, Organisation for Economic Co-operation and Development.Google Scholar
Maddison, A. (2001), The World Economy: A Millennial Perspective, Paris, Organisation for Economic Co-operation and Development.CrossRefGoogle Scholar
Mason, G., Keltner, B. and Wagner, K. (2000), ‘Productivity and service quality in banking: commercial lending in Britain, the United States and Germany’, in Barrell, R., Mason, G. and O'Mahony, M. (eds), Productivity, Innovation and Economic Performance, Cambridge, Cambridge University Press, pp. 117148.Google Scholar
Meeks, G. (1977), Disappointing Marriage: A Study of the Gains from Merger, Cambridge, Cambridge University Press.Google Scholar
Milgrom, P. and Roberts, J. (1990), ‘The economics of modern manufacturing: technology, strategy and organisation’, American Economic Review, 80, pp. 511528.Google Scholar
Nickell, S.J. (1996), ‘Competition and corporate performance’, Journal of Political Economy, 104, pp. 724746.CrossRefGoogle Scholar
North, D.G. (1990), Institutions, Institutional Change and Economic Performance, Cambridge, Cambridge University Press.CrossRefGoogle Scholar
OECD (2003), The Sources of Economic Growth in OECD Countries, Paris, Organisation for Economic Co-operation and Development.Google Scholar
Oliner, S. and Sichel, D. (2000), ‘The resurgence of growth in the late 1990s: is information technology the story?’, Journal of Economic Perspectives, 14 (4), pp. 322.CrossRefGoogle Scholar
Oliver, N. and Wilkinson, B. (1992), The Japanization of British Industry: New Developments in the 1990s (2nd edition), Oxford, Blackwell.Google Scholar
O'Mahony, M. (1999), Britain's Productivity Performance 1950-1996: An International Perspective, London, National Institute of Economic and Social Research.Google Scholar
O'Mahony, M. and van Ark, B. (2003), EU Productivity and Competitiveness: An Industry Perspective. Can Europe Resume the Catching-up Process?, European Commission, Enterprise Publications.Google Scholar
O'Mahony, M. and de Boer, W. (2002), ‘Britain's relative productivity performance: updates to 1999’, Final Report to DTI/Treasury/ONS, mimeograph.Google Scholar
O'Mahony, M., Oulton, N. and Vass, J. (1998), ‘Market services: productivity benchmarks for the UK’, Oxford Bulletin of Economics and Statistics, 60, pp. 529551.CrossRefGoogle Scholar
Oulton, N, (2001), ‘ICT and productivity growth in the United Kingdom’, Bank of England Working Paper, No. 140.Google Scholar
Prais, S.J. (1995), Productivity, Education and Training: An International Perspective, Cambridge, Cambridge University Press.Google Scholar
Prais, S.J., Jarvis, V. and Wagner, K. (1989), ‘Productivity and vocational skills in services in Britain and Germany: hotels’, National Institute Economic Review, 130, pp. 5274.CrossRefGoogle Scholar
Rosenberg, N. (ed.) (1969), The American System of Manufactures: The Report of the Committee on the Machinery of the United States 1855 and the Special Reports of George Wallis and Joseph Whitworth 1854, Edinburgh, Edinburgh University Press.Google Scholar
Rostas, L. (1948), Comparative Productivity in British and American Industry, Cambridge, Cambridge University Press.Google Scholar
Shadwell, A. (1906), Industrial Efficiency: A Comparative Study of Industrial Life in England, Germany and America, London, Longmans, Green.Google Scholar
Soskice, D.W. (1994), ‘Reconciling markets and institutions: the German apprenticeship system’, in Lynch, L.M. (ed.), Training and the Private Sector: International Comparisons, Chicago, University of Chicago Press, pp. 2560.Google Scholar
Smith, A.D., Hitchens, D.M.W.N. and Davies, S.W. (1982), International Industrial Productivity: A Comparison of Britain, America and Germany, Cambridge, Cambridge University Press.Google Scholar
Triplett, J.E. and Bosworth, B.P. (2003), ‘Productivity measurement in service industries: “Baumol's Disease” has been cured’, Federal Reserve Bank of New York Economic Policy Review, 9(3), pp. 2333.Google Scholar
Turner, G. (1969), Business in Britain, London, Eyre and Spottiswoode.Google Scholar
Williams, E.E. (1896), Made in Germany, London, Heinemann.Google Scholar