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Catching Up, Forging Ahead, and Falling Behind

Published online by Cambridge University Press:  03 March 2009

Moses Abramovitz
Moses Abramovitz
Affiliation:
The author is Coe Professor of American Economic History (emeritus) at Stanford University, Stanford, California 94305
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Abstract

A widely entertained hypothesis holds that, in comparisons among countries, productivity growth rates tend to vary inversely with productivity levels. A century of experience in a group of presently industrialized countries supports this hypothesis and the convergence of productivity levels it implies. The rate of convergence, however, varied from period to period and showed marked strength only during the first quarter-century following World War II. The general process of convergence was also accompanied by dramatic shifts in countries' productivity rankings. The paper extends the simple catch-up hypothesis to rationalize the fluctuating strength of the process and explores the connections between convergence itself and the relative success of early leaders and latecomers.

Type
Papers Presented at the Forty-Fifth Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 46 , Issue 2 , June 1986 , pp. 385 - 406
Copyright
Copyright © The Economic History Association 1986

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References

The author is Coe Professor of American Economic History (emeritus) at Stanford University, Stanford, California 94305. He acknowledges with thanks critical comments and suggestions by Paul David and Knick Harley. The present paper is the revision of a draft read to the Economic History Association at its New York meeting in September 1985. This, in turn, was a greatly abbreviated version of a longer paper since published. See “Catching Up and Falling Behind,” Fackföreningsrörelsens Institut för Ekonomisk Forskning (Trade Union Institute for Economic Research), Economic Research Report No. 1 (Stockholm, 1986).

1 Maddison, Angus, Phases of Capitalist Development (New York, 1982).Google Scholar Maddison's estimates of productivity levels are themselves extrapolations of base levels established for most, but not all, the countries by Kravis, Irving B., Heston, Alan, and Summers, Robert in their International Comparisons of Real Product and Purchasing Power (Baltimore, 1978) and in other publications by Kravis and his associates.Google Scholar

2 Salter, W.E.G., Productivity and Technical Change (Cambridge, 1960) provides a rigorous theoretical exposition of the factors determining rates of turnover and those governing the relation between productivity with capital embodying best practice and average (economically efficient) technology.Google Scholar

3 Japanese Economic Growth: Trend Acceleration in the Twentieth Century (Stanford, 1973), especially chap. 9.Google Scholar

4 Abramovitz, Moses, “Rapid Growth Potential and its Realization: The Experience of the Capitalist Economies in the Postwar Period,” in Malinvaud, Edmond, ed., Economic Growth and Resources, Proceedings of the Fifth World Congress of the International Economic Association, vol. 1 (London, 1979), pp. 1–30.Google Scholar

5 Veblen, Thorstein, Imperial Germany and the Industrial Revolution (New York, 1915), p. 70.Google Scholar

6 Olson, Mancur, The Rise and Fall of Nations: Economic Growth, Stagflation and Social Rigidities (New Haven, 1982).Google Scholar

7 Kravis, et al., International Comparisons;Google ScholarDenison, Edward F., assisted by Poullier, Jean-Pierre, Why Growth Rates Differ, Postwar Experience of Nine Western Countries (Washington, D.C., 1967). pp. 239–45.Google Scholar

8 Matthews, R.C.O., Review of Denison (1967), Economic Journal (06 1969), pp. 261–68.Google Scholar

9 My paper cited earlier describes the operation of these factors in the 1950s and 1960s and tries to show how they worked to permit productivity growth to rise in so many countries rapidly, in concert and for such an extended period (“Rapid Growth Potential and Its Realization,” pp. 18–30).

10 The countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Sweden, Switzerland, United Kingdom, and United States.

11 In these calculations I have treated either the United States or the United Kingdom as the productivity leader from 1870 to 1913. Literal acceptance of Maddison's estimates, however, make Australia the leader from 1870–1913. Moreover, Belgium and the Netherlands stand slightly higher than the United States in 1870. Here are Maddison's relatives for those years (from Phases, Table 5.2): Since Australia's high standing in this period mainly reflected an outstandingly favorable situation of natural resources relative to population, it would be misleading to regard that country as the technological leader or to treat the productivity changes in other countries relative to Australia's as indicators of the catch-up process. Similarly, the small size and specialized character of the Belgian and Dutch economies make them inappropriate benchmarks.

12 Maddison, Phases, Table C5.

13 Since growth rates are calculated as rates of change between standings at the terminal dates of periods, errors in the estimates of such standings will generate errors in the derived growth rates. If errors at both terminal dates were random, and if those at the end-year were independent of those at the initial year, there would be a tendency on that account for growth rates to be inverse correlated with initial-year standings. The inverse correlation coefficients would be biased upwards. Note, however, that if errors at terminal years were random and independent and of equal magnitude, there would be no tendency on that account for the variance of standings about the mean to decline between initial and end-year dates. The error bias would run against the marked decline in variance that we observe. Errors in late-year data, however, are unlikely to be so large, so an error bias is present.

14 See also Baumol, William J., “Productivity Growth, Convergence and Welfare: What the Long-run Data Show,” C. V. Starr Center for Applied Economics, New York University, Research Report No. 85–27, 08 1985.Google Scholar

15 See Abramovitz, “Rapid Growth Potential and its Realization.”

16 Olson, Rise and Fall.

17 Some comments on the catch-up process after 1973 may be found in Abramovitz, , “Catching Up and Falling Behind” (Stockholm, 1986), pp. 33–39.Google Scholar

18 If one follows Maddison's estimates (Phases, Table C. 19), the long period from 1870 to 1979 saw Australia fall by 8 places in the ranking of his 16 countries, Italy by 2½, Switzerland by 8, and the United Kingdom by 10. Meanwhile the United States rose by 4, Germany by 4½, Norway by 5, Sweden by 7, and France by 8.

19 The possibility of overtaking and surpassing, however, was considered theoretically by Ames, Edward and Rosenberg, Nathan in a closely reasoned and persuasive article, “Changing Technological Leadership and Industrial Growth,” Economic Journal, 72 (1963), pp. 13–31. They conclude that the troubles connected with leadership and industrial “aging” that doom early leaders to decline in the productivity scale are not persuasive. They hold that outcomes turn on a variety of empirical conditions, the presence of which is uncertain and not foreordained.CrossRefGoogle Scholar

20 These arguments are anticipated and elaborated in Rosenberg, Nathan's fertile and original paper, “Why in America?”, in Mayr, Otto and Post, Robert, eds., Yankee Enterprise: The Rise of the American System of Manufactures (Washington, D.C., 1981).Google Scholar

21 See also Matthews, R.C.O., Feinstein, Charles, and Odling-Smee, John, British Economic Growth, 1856–1973 (Stanford, 1983), chaps. 14, 15, 17. Their analysis does not find a large effect on British productivity growth from 1870 to 1913.Google Scholar

22 The migration from East to West Germany in the 1950s was a special case. It brought to West Germany educated and skilled countrymen strongly motivated to rebuild their lives and restore their fortunes.

23 Kindleberger, Charles P., “Obsolescence and Technical Change.” Oxford Institute of Statistics Bulletin (08 1961), pp. 281–97.Google Scholar

24 These and similar questions are raised by experienced observers of American business. They are well summarized by Denison, Edward, Trends in American Economic Growth, 1929–1982, (Washington, D.C., 1985), chap. 3.Google Scholar

25 Representative arguments supporting the idea that social capability has suffered, together with some quantitative evidence, may be found in Olson, Rise and Fall; Feliner, William, “The Declining Growth of American Productivity: An Introductory Note,” in Fellner, W., ed., Contemporary Economic Problems, 1979 (Washington, D.C., 1979);Google Scholar and Lindbeck, Assar, “Limits to the Welfare State,” Challenge (12 1985).Google Scholar For argument and evidence on the other side, see Danzigar, Sheldon, Haveman, Robert, and Plotnick, Robert, “How Income Transfers Affect Work, Savings and Income Distribution, Journal of Economic Literature, 19 (09 1982), pp. 975–1028;Google Scholar and Denison, Edw. F., Accounting for Slower Economic Growth (Washington, D.C., 1979) pp. 127–38.Google Scholar

26 See Norton, R. D., “Regional Life Cycles and US Industrial Rejuvenation,” in Giersch, Herbert, ed., Towards an Explanation of Economic Growth (Tübingen, 1981), pp. 253–80;Google Scholar and Norton, R. D., “Industrial Policy and American Renewal,” Journal of Economic Literature, 24 (03 1986).Google Scholar