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Capital Stocks and Productivity in Industrial Nations

Published online by Cambridge University Press:  26 March 2020

Mary O'Mahony
Mary O'Mahony*
Affiliation:
Leverhulme Trust
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Abstract

This article presents estimates of the contribution of physical capital to explaining labour productivity differences between Britain and four of her major competitors, the United States, Germany, France and Japan. The paper uses a standardised method to estimate capital stocks in the five countries. It presents arguments why this may be preferable to comparing official capital stock figures since the latter are sensitive to differences in measurement techniques used by the statistical offices. In the aggregate economy differences in physical capital are important in explaining labour productivity levels in Britain relative to the United States, Germany and France but cannot explain Britain's labour productivity advantage over Japan. In manufacturing Britain's lower capital per unit of labour also helps explain her lower labour productivity levels relative to all four countries but the contribution of capital is generally lower in manufacturing than for the aggregate economy. For both the aggregate economy and manufacturing differences in capital growth rates help explain Britain's productivity growth performance in the past three decades relative to the United States and Japan but have little explanatory power relative to Germany and France.

Type
Articles
Information
National Institute Economic Review , Volume 145 , August 1993 , pp. 108 - 117
Copyright
Copyright © 1993 National Institute of Economic and Social Research

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Footnotes

∗

This research was funded by a grant from the Leverhulme Trust to which I owe thanks. I am particularly grateful to Angus Maddison who initially encouraged me to work on the issue of international measures of physical capital stocks and for comments received. Helpful comments were also received from two anonymous referees, Bart van Ark, Andrew Britton, Steve Broadberry, David Mayes, Nick Oulton and Dirk Pilat.

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