I’ve been putting some material together for textbook revision, and found myself looking at European versus US productivity performance over the past couple of decades. I sort of knew the facts here, but this recent paper by Bart van Ark (pdf) seemed to me to make the points especially clearly, and I found myself rolling my own versions of some of his numbers.
To get some sense of productivity trends, van Ark uses a fairly fancy statistical technique (Hodrick-Prescott filter). But a simple 5-year moving average, to smooth out the business cycle, does about the same thing. Here’s productivity growth in the US and in “Europe” defined as the average of the 4 big economies since 1970:
Total Economy Database European productivity grew faster than the US until the 1990s, mainly reflecting catchup; but America moved ahead in the late 1990s; the data suggest that the differential has leveled out since, so this may have been a one-time bulge.
And what was it about? Van Ark’s data point to a huge surge between 1995 and 2004 in US productivity, not so much in producing goods as in distributing them. And we know what that’s about: Wal-Mart and other big box stores.
I’m not denigrating these productivity gains. What’s interesting, though, is that if you’re looking for a story about the relative American revival from 1995 until recently, it’s not so much a broad, generic economy thing as it is a story of one particular innovation that for whatever reason — land use regulations? — Europe was slow to imitate.
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