DP4597 Explaining Anglo-German Productivity Differences in Services Since 1870

Author(s):	Stephen N Broadberry
Publication Date:	September 2004
Keyword(s):	Britain, Germany, productivity, services
JEL(s):	N10, N30, O40, O52
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=4597

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 urbanised 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.