Two Centuries of Economic Growth: Europe Chasing the American Frontier
AbstractStarting from the same level of productivity and per-capita income as the United States in the mid-nineteenth century, Europe fell behind steadily to a level of barely half in 1950, and then began a rapid catch-up. While Europe's level of productivity has almost converged, its income per person has leveled off at about three-quarters of America's. How could Europe be so productive yet so poor? The simple answer is that hours per person in Europe have fallen drastically in the past 40 years, reflecting long vacations, high unemployment, and low labor force participation, and only about one-third of the Europe-America difference reflects voluntarily chosen leisure. The paper contains a welfare analysis of the difference and argues that conventional national income data overstate the advantage of America over Europe, and that Europe's welfare is about 8 percent below the American level rather than the 25 percent implied by a comparison of measured income per capita. A historical analysis traces Europe's falling behind after 1870 to American political unity, fostering large-scale material-intensive manufacturing and a set of marketing innovations to a set of additional advantages that would not have been possessed even if Europe had hypothetically created a United States of Europe in 1870. After 1913 the U. S. surged further ahead, due to its early exploitation of the great inventions of electricity and the internal combustion engine, while Europe was distracted by wars and interwar economic chaos. After 1950 Europe's catch up was achieved both by exploiting the great inventions 40 years late, and also by the gradual erosion of early American advantages. But after 1995 the gap began to widen again, a development that brings to the forefront fundamental American advantages in fostering and exploiting innovation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10662.
Date of creation: Aug 2004
Date of revision:
Note: EFG DAE PR
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Gordon, Robert J, 2004. "Two Centuries of Economic Growth: Europe Chasing the American Frontier," CEPR Discussion Papers 4415, C.E.P.R. Discussion Papers.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-31 (All new papers)
- NEP-EEC-2004-08-31 (European Economics)
- NEP-EFF-2004-10-21 (Efficiency & Productivity)
- NEP-HIS-2004-08-31 (Business, Economic & Financial History)
- NEP-INO-2004-08-31 (Innovation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert J. Gordon, 1998.
"Is There a Tradeoff between Unemployment and Productivity Growth?,"
NBER Working Papers
5081, National Bureau of Economic Research, Inc.
- Gordon, Robert J, 1995. "Is There a Trade-off between Unemployment and Productivity Growth?," CEPR Discussion Papers 1159, C.E.P.R. Discussion Papers.
- Paul David & Gavin Wright, 1999.
"Early Twentieth Century Productivity Growth Dynamics: An Inquiry into the Economic History of Our Ignorance,"
Economics Series Working Papers
1999-W33, University of Oxford, Department of Economics.
- Paul A. David & Gavin Wright, 1999. "Early Twentieth Century Productivity Growth Dynamics: An Inquiry into the Economic History of "Our Ignorance"," Oxford University Economic and Social History Series _033, Economics Group, Nuffield College, University of Oxford.
- Paul A. David & Gavin Wright, 2005. "Early Twentieth Century Productivity Growth Dynamics: An Inquiry into the Economic History of “Our Ignorance”," Macroeconomics 0502023, EconWPA.
- Devine, Warren D., 1983. "From Shafts to Wires: Historical Perspective on Electrification," The Journal of Economic History, Cambridge University Press, vol. 43(02), pages 347-372, June.
- Robert J. Gordon, 2000.
"Does the "New Economy" Measure Up to the Great Inventions of the Past?,"
Journal of Economic Perspectives,
American Economic Association, vol. 14(4), pages 49-74, Fall.
- Robert J. Gordon, 2000. "Does the "New Economy" Measure up to the Great Inventions of the Past?," NBER Working Papers 7833, National Bureau of Economic Research, Inc.
- Gordon, Robert J, 2000. "Does the 'New Economy' Measure up to the Great Inventions of the Past?," CEPR Discussion Papers 2607, C.E.P.R. Discussion Papers.
- Goldin, Claudia, 1998. "America's Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century," Scholarly Articles 2664307, Harvard University Department of Economics.
- Goldin, Claudia, 1998. "America's Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century," The Journal of Economic History, Cambridge University Press, vol. 58(02), pages 345-374, June.
- Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statistics
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.