Working Paper: NBER ID: w10364
Authors: Stephen N. Broadberry; Douglas A. Irwin
Abstract: A number of writers have recently questioned whether labor 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 labor productivity lead in industry as early as 1840, especially in manufacturing, labor productivity was broadly equal in the two countries in agriculture, while the United Kingdom was ahead in services. Hence aggregate labor productivity was higher in the United Kingdom, particularly since the United States had a larger share of the labor force in low value-added agriculture. U.S. overtaking occurred decisively only during the 1890s, as labor productivity pulled ahead in services and the share of agricultural employment declined substantially. Labor force participation was lower in the United States, so that the United Kingdom's labor productivity advantage in the mid-nineteenth century translated into a larger per capita income lead.
Keywords: No keywords provided
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 industry in the United States from 1840 (N62) | Higher per capita income in the United States (P19) |
| Resource abundance (Q33) | Higher capital intensity in US manufacturing (L60) |
| Higher capital intensity in US manufacturing (L60) | Labor-saving technical progress in US manufacturing (O14) |
| Labor productivity in agriculture in the US (J43) | Labor productivity in agriculture in the UK (Q11) |
| Labor productivity in services in the UK (L89) | Higher aggregate labor productivity in the UK (O49) |
| Improvements in service sector productivity (O49) | US overtaking in labor productivity (O49) |
| Decline in agricultural employment (J43) | US overtaking in labor productivity (O49) |
| Lower labor force participation rate in the US (J49) | Differences in per capita income between the US and UK (D31) |