Explaining Anglo-German Productivity Differences in Services Since 1870

Abstract:     
Germany overtook Britain in comparative productivity levels for the whole economy primarily as a result of trends in services rather than trends in industry. Britain's productivity lead in services before World War II reflected external economies of scale in a highly urbanized economy with an international orientation. Low productivity in Germany reflected the under-development of services in an economy that was slow to move out of agriculture. As German agricultural employment contracted sharply from the 1950s, catching-up occurred in services. This was aided by a sharp increase in human and physical capital accumulation, underpinned by the institutional framework of the postwar settlement.

Number of Pages in PDF File: 48

Keywords: Productivity, services, Britain, Germany

JEL Classification: N10, N30, O40, O52

working papers series