Working Paper: CEPR ID: DP4596
Authors: Stephen N. Broadberry; Douglas Irwin
Abstract: A number of writers have recently questioned whether labour productivity or per capita incomes were ever higher in the United Kingdom than in the United States. We show that although the United States already had a substantial labour productivity lead in industry as early as 1840, especially in manufacturing, labour productivity was broadly equal in the two countries in agriculture, while the United Kingdom was ahead in services. Hence aggregate labour productivity was higher in the United Kingdom, particularly since the United States had a larger share of the labour force in low value-added agriculture. US overtaking occurred decisively only during the 1890s, as labour productivity pulled ahead in services and the share of agricultural employment declined substantially. The share of the population in the labour force was lower in the United States, so that the United Kingdom?s labour productivity advantage in the mid-nineteenth century translated into a larger per capita income lead.
Keywords: International Comparison; Labour Productivity; Per Capita Income; Sectoral Disaggregation
JEL Codes: N10; N30; O47; O57
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor productivity in agriculture (U.S.) (J43) | aggregate labor productivity (U.K.) (O47) |
| U.K. labor productivity advantage in mid-nineteenth century (N63) | larger per capita income lead in the U.K. (D33) |
| increase in productivity in services (U.S.) (O49) | U.S. overtaking U.K. in labor productivity during the 1890s (N62) |
| decline in share of agricultural employment (U.S.) (J43) | U.S. overtaking U.K. in labor productivity during the 1890s (N62) |
| rise in share of population in U.S. labor force after 1880 (J49) | U.S. achieving per capita income leadership early in the twentieth century (N11) |
| overall labor productivity improvements (U.S.) (O49) | U.S. achieving per capita income leadership early in the twentieth century (N11) |
| sectoral productivity (agriculture, industry, services) (O49) | overall economic performance (U.S.) (P17) |
| labor productivity in the United States in industry in 1840 (N61) | aggregate labor productivity in the U.K. (E23) |