The contributions of national labour and product market institutions to differences in long-run rates and patterns of economic growth form a major focus of CEPR's research initiative on `Comparative Experience of Economic Growth in Postwar Europe' (supported by a SPES grant from the Commission of the European Communities). Papers presented in a workshop on `Interpreting Postwar Growth', held in Berlin on 4/5 June and hosted by the Wissenschaftszentrum Berlin für Sozialforschung (WZB) compared such effects across European economies and their implications for economic transformation in the East. The workshop was organized by Nick Crafts, Professor of Economic History at the University of Warwick and Research Fellow in CEPR's Human Resources programme, and Ronald Schettkat and David Soskice, respectively Senior Research Fellow and Director of the Economic Change and Employment Research Unit at the WZB.

Ronald Schettkat opened the workshop with `Innovation and the Institutional Framework: Technological Change in the German Economy', in which he examined potential barriers to innovation in German industries: co-determination, employment protection and collective agreements on workers' participation in the innovation process. From an analysis based on Ifo's surveys of employers he found that impediments to innovation resulting from participation are relatively unimportant and that the level of protection against rationalization's negative effects is positively correlated with innovative activities across German industries. Schettkat supplemented these findings with an econometric analysis which showed that employees in more innovative industries faced a lower risk of becoming unemployed; this is consistent with characterizing the German economy as one with a highly skilled work force that allows for internal adjustments. Participants expressed some doubts that workers' councils affect the innovation process, but David Soskice cited examples of how non-cooperative behaviour by workers' representatives can create such difficulties. Giovanni Urga (Queen Mary and Westfield College, London) stressed the author's failure to deal adequately with controlling for fixed effects.

Giovanni Urga then presented his own paper, `Wages and Productivity Growth in a Unionized Labour Market: The Case of Italy', which examined productivity change over 1958-85 using a model like that of Nickell and Wadhwani, estimated on data for 45 Italian manufacturing firms. His results demonstrated that trade union density had negative effects on productivity change in the 1960s and early 1970s but not in the 1980s, during the phase of reconstruction of industry and higher unemployment. Urga emphasized, however, the difficulty of measuring trade union bargaining power. Discussion focused on the need to examine alternative proxy variables in order to implement a bargaining model specification more completely. Nick Crafts stressed the need to include measures of product market competition.

David Sapsford (University of Lancaster) and Peter Turnbull (Cardiff Business School) then presented `Industrial Relations in the Docks: A Cross Country Study of Institutional Structures and their Effects'. Their comparisons and econometric analysis focused on strike activity in a sector where international differences in productivity have been large, sunk costs are important and demand for labour is volatile. They found strong contrasts in the ability to assimilate new technology effectively between the UK and Australia on the one hand and the Netherlands and the US West Coast on the other. These reflected institutional arrangements. The discussion stressed the need to allow potential competition among ports to influence bargaining over new technology.

The afternoon of the first day was devoted to critical analyses of the ideas expressed by Olson in The Rise and Decline of Nations (1982). Presenting `From Communism to Market Democracy: Why is Economic Performance even Worse after Communism is Abandoned?', Mancur Olson (University of Maryland) extended his earlier analysis to consider East European post-war growth. He concluded that strong and harsh dictatorship was essential to Eastern Europe's rapid growth in the post-war period, but bureaucratic devolution ultimately dissipated the encompassing interest of the autocrat. This has left a legacy of a complete collapse of encompassing institutions, the continuance of powerful sectional interests and an immediate lack of the normal economic advantages of democracy (e.g. property rights). The prognosis is therefore poor and the situation in the early 1990s very different from that which faced Western Europe during reconstruction, after the wartime destruction of sclerotic tendencies. Participants generally welcomed the insights of the analysis but questioned their unmodified application to the transition from communism. Karl-Heinz Paqué (Institut für Weltwirtschaft, Kiel) stressed the importance of the restructuring of international trade flows following the collapse of the CMEA.

Presenting his own paper, `Some Notes on Mancur Olson's Interpretation of the German Economic Miracle', Karl-Heinz Paqué expressed strong doubts about Olson's earlier interpretation of the Wirtschaftswunder. He stressed the rapid re-establishment of distributional coalitions after the war and the positive roles of favourable world market conditions, skill availabilities and high-quality immigration. Paqué stressed the re-establishment of the Weimar market economy as a key feature which can not be replicated in Eastern Europe today. David Soskice and Klaus Reeh (Commissariat Général du Plan, Paris) were more favourable to Olsonian views, notably in their emphasis on the enhanced role of encompassing institutions in Germany after World War II.

The remainder of the afternoon session was filled by shorter presentations. Wyn Grant (University of Warwick) presented `A Political Science Perspective on Olson', which also emphasized the early renaissance of post-war distributional coalitions in Germany and also in Japan. He criticized the favourable view of the European Community in The Rise and Decline of Nations as a force to reduce the power of interest groups. Klaus Reeh elaborated upon this theme in `Something to Conclude about the Past, Something to Learn for the Future of European Integration', He argued that the Community has itself passed through a process of Olsonian sclerosis, so that unless government action is limited at EC level the single-market programme will do much less for growth than did the Treaty of Rome. Olson accepted the need to consider sclerotic tendencies operating through Community institutions, but he was not willing to abandon his view that the destruction of distributional coalitions facilitated the Wirtschaftswunder.

Brigitte Unger (Wirtschaftsuniversität Wien) and Frans van Waarden (Universität Konstanz) opened the second day's proceedings by continuing the re-examination of Olson's hypotheses in their paper, `Interest Associations and Economic Growth: A Cross-Country Comparison', which strongly criticized Olson's position. They argued that there was no evidence either that war and occupation had destroyed distributional coalitions in Europe or that an increase in the number of interest associations necessarily increased sclerosis, because these effects tended to cancel out. They also presented a series of case-studies which indicated that sectoral associations can be favourable to growth. Finally, they used a novel classification of growth rates based on the extent of `sectoral corporatism' in each economy, whose results contradicted Olson's hypothesis of a negative association between the two.

In the ensuing vigorous debate, participants made several objections and qualifications to Unger and van Waarden's position. Karl-Heinz Paqué pointed out that the cancelling out of interest groups' `influence' on policy did not preclude deadweight losses from the resources employed in lobbying. Wendy Carlin (University College, London) noted that patterns of ownership and corporate governance rather than trade associations may be the key to promoting high rates of long-run investment, while David Soskice emphasized the role of openness to trade in maintaining the efficiency of cartelized industries.

The next two papers used different methodologies to consider the comparative productivity of East and West German manufacturing at the end of the Communist period. In their paper, `Comparative Productivity in East and West German Manufacturing before the Reunification', Nienke Beintema and Bart van Ark (Universiteit Gröningen) used an industry of origin approach to purchasing power parity measurement to estimate 1987 East German productivity at 28% of the West German level, i.e. between South Korea and Brazil. They stressed, however, that quality differences may have contaminated their estimates. Participants shared this unease. Karl-Heinz Paqué and Wendy Carlin stressed the need to make greater use of price data on exports to the West and post-unification output as a check on the calculations.

David Hitchens (Queen's University, Belfast) and Karin Wagner (WZB) then presented their joint paper with Esmond Birnie, `Productivity and Competitiveness in East German Manufacturing: A Matched Plant Comparison '. This sample indicated East German productivity at 33% of the West German level, so that East German firms would need to replace most of their capital stock to become competitive at wage parity. This would also require substantial investment in retraining. Significantly East German management appeared to underestimate the training and reorganization needed to catch up with the West and to exaggerate the potential impact of investments in physical capital. Participants found these results plausible and drew the inference that it was necessary to generate strong market pressures in order to promote the efficient use of capital and more realistic management aims.

In their paper, `On the Historical Continuity of Economic Growth', Theo van de Klundert and Anton van Schaik (Universiteit Tilburg) conducted a macroeconometric analysis of growth for a cross-section of OECD countries since 1870. They found that investment has played the central role in the long-run `normal' pattern of growth. Catch-up variables of the kind made popular in the recent literature played a significant role only in the exceptional period 1950-73, and the more recent slow-down in OECD growth was a return to normality. Several participants expressed caution about these results. In particular, Nick Crafts was worried by the absence of any human capital variable in the estimating equation.

In the final paper, `The German Postwar Settlement and the Rise of Coalitions in the Postwar Bargaining System', Christoph Dartmann (University of Aberdeen) returned to the theme of interest groups in German reconstruction. He reported work based on archival research and focused on the part played by the Marshall Plan authorities in the development of `codetermination'. He showed that the resulting neo-corporatist institutions were an important legacy of the Marshall Plan era.