PhD ceremony Mr. J. Veenstra: Missed opportunities? Germany and the transatlantic labor-productivity gap, 1900-1940

PhD ceremony: Mr. J. Veenstra

Dissertation: Missed opportunities? Germany and the transatlantic labor-productivity gap, 1900-1940

Promotor(s): prof. H.J. de Jong

Faculty: Economics

At the turn of the twentieth century a labor-productivity gap emerged between Europe and the US in manufacturing with the former lagging increasingly far behind the latter. This transatlantic gap in economic performance proved irreversible and persists until the present day. As such, it is a main feature of modern economic development. The divergence coincided with a period of rapid technological change, the second industrial revolution, which raises the question whether European countries failed to effectively catch the winds of change and, therefore, miss out on opportunities for growth?

Veenstra’s thesis addresses this question for Germany, a country that given its prominent position in Europe is underrepresented in the literature, in the period 1900-1940. Most importantly, the significance of technology adoption for Germany’s labor-productivity performance is studied and its contribution to the widening German/US labor-productivity gap quantified.

In his analysis Veenstra moves away from explanatory frameworks customary applied to the German/US labor-productivity gap. While the performance gap is traditionally associated with a failure on the part of Europe to operate at US levels of capital intensity, I show that during the interwar period Germany rapidly acquired American-type technology. German manufacturing lagged behind because of an inefficient use of newly obtained technology, rather than due to low capital-intensity levels. Even though the process of capital-intensity convergence failed to bring German labor-productivity levels closer to the US in the short run, it formed the necessary first step on the road to Germany’s growth miracle in the post-World War II period.