Two Centuries of Economic Growth: Europe Chasing the American Frontier
Starting 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 labour 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% below the American level rather than the 25% 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, and 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 US 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.
|Date of creation:||Jun 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Paul A. David & Gavin Wright, 2005.
"Early Twentieth Century Productivity Growth Dynamics: An Inquiry into the Economic History of “Our Ignorance”,"
- 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 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.
- 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.
- 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.
- Robert J. Gordon, 1995.
"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.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4415. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.