Post-war Growth
Dutch data

The economic performance of the Netherlands has followed a similar long-run trend to most countries in north-west Europe, as the exhaustion of catch-up potential and the 1970s oil crises largely accounted for the growth slow-down of the past two decades. Nevertheless, per capita income has gradually fallen below the north-west European average level while labour productivity (measured as output per hour worked) has remained well above the corresponding level. In Discussion Paper No. 932, Bart van Ark, Jakob de Haan and Herman de Jong describe the country's emergence from a low-wage economy in the 1960s as centralized wage bargaining promoted heavy investment in physical capital. With levels of total factor productivity close to or below those of its neighbours, the Dutch economy remained competitive in terms of labour costs per unit of output despite the strength of the guilder, as high wages combined with high labour productivity.

The slow-down of real output growth in the 1970s was accompanied by a large reduction in the labour input: total hours worked fell by almost 10% during 1973-9 but rose again during the 1980s, largely as a result of a rapid rise in female participation, which had traditionally been very low. The continued fall in working hours per person employed during the 1980s reflected the increased incidence of part-time work and measures to reduce the working week, while generous systems of disability benefits and early retirement encouraged increasing numbers of people of working age to drop out of the labour force. Despite the significant rise in leisure relative to working hours, unemployment rates have remained relatively high since the early 1970s. Van Ark, de Haan and de Jong also examine the effect of the large public sector on economic growth to show that the extensive social security system does not appear to exert a direct negative effect on the supply of labour. The increasing wedge between gross and net wages, which is due in particular to the rise in social security payments by employers and employees, may nevertheless have reduced the labour supply, while the high cost of labour has further contributed to the high capital intensity of the economy.

Characteristics of Economic Growth in the Netherlands During the Post-war Period
Bart van Ark, Jakob de Haan and Herman J de Jong

Discussion Paper No. 932, April 1994 (HR)