While Europe's level of productivity has almost converged to the United States'one, its per-capita income has leveled off at about threequarters of America's. How could Europe be so productive yet so poor? The simple answer is that hours per person in Europe have fallen drastically in the past forty years, reflecting long vacations, high unemployment, and low labor force participation. A historical analysis traces Europe's falling behind after 1870 to American political unity, fostering large-scale material-intensive manufacturing and a set of marketing innovations, and, after 1913, to the early American exploitation of the great inventions of electricity and the internal combustion engine, while Europe was distracted by wars. After 1950, Europe's catch up was achieved both by exploiting the great inventions forty years later, and also by the gradual erosion of early American advantages. JEL codes : A1, N0, 00.
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)