EXPLAINING ANGLO‐AMERICAN PRODUCTIVITY DIFFERENCES IN THE MID‐TWENTIETH CENTURY*

Abstract

It is shown that American industry was already more than twice as productive as British industry by the 1920s, and that the gap was larger in heavy industry, confirming Britain's comparative advantage in light industry. A large data set is assembled and used in a cross-sectional econometric analysis of the productivity gap in the mid-1930s. This is complemented by a series of case studies, suggesting that market sharing agreements (which cannot be adequately captured in an econometric approach) were an important, neglected factor explaining productivity differences. Copyright 1990 by Blackwell Publishing Ltd