Chapter 4: Productivity Transitions in Large Mature Economies: France, Germany and the UK
Bernd Görzig, Martin Gornig, Laurence Nayman and Mary O’Mahony 4.1 INTRODUCTION This chapter considers the performance of three of the largest and most mature economies in the EU: France, Germany and the United Kingdom. There is a vast existing literature on comparative productivity performance of these three, often including comparisons with the US – examples include O’Mahony (1999), Crafts and O’Mahony (2001), O’Mahony and de Boer (2002) and Mason et al. (2007) – which continued an even longer-run tradition of international comparative research in economic history.1 Much of this literature is concerned with the issue of long-run convergence and this is a convenient starting point for this chapter. Thus, looking at the aggregate economy, the post-war period can be described as one of convergence of the European countries to the US. The UK started the post-war period with levels of labour productivity above France and Germany, but the UK was overtaken by both in the mid-1960s. From then on the two continental European economies continued to out-perform the UK, both catching-up with the US in the early 1990s while the UK lagged behind. This is illustrated in Figure 4.1. Explanations for catching-up include substitution of capital for labour and investment in human capital, which occurred at a slower pace in the UK than in France or Germany. When allowance is made for investment in broad capital, the US continued to show an advantage over all three countries in total factor productivity (TFP) levels (Crafts and O’Mahony, 2001). Since the mid-1990s, there...
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