How Did the United States and Germany Overtake Britian? A Sectoral Analysis of Comparative Productivity Levels, 1870–1990

Abstract

A sectoral analysis of comparative labor productivity levels over the period 1870 to 1990 suggests mechanisms of catching-up and forging ahead that are rather different from those found in the conventional literature. Both Germany and the United States caught up with and overtook Britain in terms of aggregate labor productivity largely by shifting resources out of agriculture and improving their relative productivity position in services rather than by improving their position in manufacturing. Although capital played some role, the changes in comparative labor productivity also reflected changes in comparative total factor productivity, related to technology and organization.