Theory and Measurement of Productivity and Cost Gaps: A Comparison for the Manufacturing Industry in U.S., Japan and Germany, 1960–1979

Abstract

The purpose of this study is the quantification of the hypothesis that in international competition in technology and efficiency the less developed countries chase the newly developed countries, these in turn chase Japan, and Japan has chased Western Europe and the United States. Since the U.S. and Western Europe seem to forfeit their role as the engine of innovations, they run the risk of getting surpassed:by the former trailers like Japan and the newly developed countries. One reason for the catching-up process is that after World War II individual countries have experienced different growth rates in total factor productivity (TFP). Such differences accumulate over time and contribute to the reduction of prevailing productivity gaps in an international comparison. Besides thi unexplained residual TFP there are also pure economic factors which contribute to a change in productivity gaps. Amongst those factors are an equalization of marginal productivities, of input and output prices and of factor intensities.