This presentation is about two closely related topics, the advance of the frontier of economic performance in the United States and the erratic timing of Europe's performance, for many decades falling ever further beneath the frontier and then catching up, either partially or completely depending on the measure of performance that is used. The timing of this fallback and catchup helps us to understand and sort through the many explanations previously offered for the growth leadership of the U. S. after 1870. The pinnacle of American leadership came in 1945, as American productivity was boosted by its herculean production achievements in World War II while Europe suffered from wartime destruction.
The paper begins with a review of the data on output per capita and output per hour in an average of twelve European countries as compared to the United States. Europe in the 1990s almost caught up to the U. S. in its labor productivity yet not in its measured standard of living, raising interesting issues of welfare economics in the treatment of these two measures. The longest section of the paper consists of a new analysis of the sources of U. S. superiority, divided between the 1870-1913 and 1913-1950 sub-intervals.
Throughout this core section of the paper, an attempt is made to distinguish those aspects of U. S. superiority which relate to free trade and political unification, as contrasted to other factors which differentiated the pre-1913 United States from a hypothetical "United States of Europe." The final section of the paper provides an interpretation of Europe's catch-up after 1950. What sources of pre-1950 U. S. advantage reversed themselves or evaporated, and did any new factors explain Europe's catch-up?
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