Abstract
This chapter surveys cliometric research on economic growth in Western Europe from 1950 to the early 1970s, the so-called “Golden Age.” Several hypotheses to explain the very rapid growth of that period are examined including those proposed by Abramovitz, Eichengreen, Janossy, and Kindleberger. Cross-country variation in growth performance is highlighted and explanations for it are explored. Further insights into the Golden Age are obtained by considering the reasons for the subsequent growth slowdown. It is concluded that research in this area has made substantial progress in the last 30 years informed by ideas from new growth economics.
Notes
- 1.
Their results show that this did not apply prior to 1950.
- 2.
It should be noted that the results of a data envelopment analysis also give strong support to the claim that TFP growth during the European Golden Age was boosted considerably by improvements over time in the efficiency of factor use (Jerzmanowski 2007).
- 3.
The graph embodies a trend-stationary view of the world. Arguably, Janossy himself believed in segmented trends where labour productivity growth in each period was underpinned by investment in human capital, see Vonyo (2008).
- 4.
Eichengreen and Ritschl (2009) estimate that TFP growth in West Germany was 5.39% per year during 1950–1960 and it seems reasonable to infer from their discussion that as much as 3.5 percentage points per year may have been due to reconstruction.
- 5.
Magacho and McCombie (2017) is a recent review which suggests that the proposition will be rejected by mainstream growth economists. Maddison (1987) attributed only a small part of the Solow residual during the Golden Age to scale economies, which he assumed amounted to 3% of GDP growth, but this was no more than a guess.
- 6.
Estevadeordal and Taylor point to reductions in tariffs on capital goods with consequent increases in the capital to labor ratio as central to the positive levels effect of trade liberalization; for a similar argument applied to Golden Age Europe, see Cubel and Sanchis (2009).
- 7.
More details of how it worked can be found in Crafts (2013).
- 8.
See Eichengreen (1993) which also contains a detailed description of the logic and mechanics of EPU.
- 9.
Exclusion from the Marshall Plan and EPU postponed but did not necessarily preclude liberalization, as is shown by the 1959 reform in Spain which raised the growth rate by 1 percentage point per year for the next decade and a half (Prados de la Escosura et al. 2011).
- 10.
The six founder members were Belgium, France, Germany, Italy, Luxembourg and Netherlands.
- 11.
In the endogenous innovation framework the “hold-up” arises when after a successful innovation workers use their bargaining power to extract a share of the profits. This reduces the incentive to innovate and thus the rate of growth. The more unions are involved in the bargaining, the more profits are reduced. The problem can be eliminated if a binding contract prevents renegotiation or there is no union or if a cooperative equilibrium is achieved with a single union. For a formal model and empirical evidence, see Bean and Crafts (1996).
- 12.
The concept of the “post-war consensus” should be understood as the set of policies regarded as feasible by senior politicians and civil servants given presumed political constraints (Kavanagh and Morris 1994). This implied a high degree of policy convergence but did not connote ideological convergence between the Conservative and Labour parties (Hickson 2004).
- 13.
Some countries have improved test scores quite rapidly, notably, Finland while elsewhere, for example, Italy, there is retrogression.
References
Abramovitz M (1986) Catching up, forging ahead, and falling behind. J Econ Hist 46:385–406
Abramovitz M, David PA (1996) Convergence and delayed catch-up: productivity leadership and the waning of American exceptionalism. In: Landau R, Taylor T, Wright G (eds) The mosaic of economic growth. Stanford University Press, Stanford, pp 21–62
Acemoglu D, Aghion P, Zilibotti F (2006) Distance to frontier, selection, and economic growth. J Eur Econ Assoc 4:37–74
Aghion P, Howitt P (1992) A model of growth through creative destruction. Econometrica 60:323–351
Aghion P, Howitt P (2006) Appropriate growth theory: a unifying framework. J Eur Econ Assoc 4:269–314
Aghion P, Saint-Paul G (1998) On the virtue of bad times: an analysis of the interaction between economic fluctuations and productivity growth. Macroecon Dyn 2:322–344
Baccaro L, Simoni M (2007) Centralized wage bargaining and the ‘Celtic Tiger’ phenomenon. Ind Relat 46:426–469
Bacha EL (1990) A three-gap model of foreign transfers and the GDP growth rate in developing countries. J Dev Econ 32:279–296
Badinger H (2005) Growth effects of economic integration: evidence from the EU member states. Rev World Econ 141:50–78
Badinger H, Maydell N (2009) Legal and economic issues in completing the EU internal market for services: an interdisciplinary perspective. J Common Mark Stud 47:693–717
Barro RJ (1991) Economic growth in a cross-section of countries. Q J Econ 106:407–443
Barry F (2002) The Celtic Tiger Era: delayed convergence or regional boom? Q Econ Commentary 21:84–91
Barry F, Devereux MB (2006) A theoretical growth model for Ireland. Econ Soc Rev 37:245–262
Baumol WJ (1986) Productivity growth, convergence and welfare: what the long-run data show. Am Econ Rev 76:1072–1085
Bayoumi T, Eichengreen B (1995) Is regionalism simply a diversion? Evidence from the evolution of the EC and EFTA. NBER working paper no. 5283
Bean C, Crafts N (1996) British economic growth since 1945: relative economic decline … and renaissance? In: Crafts N, Toniolo G (eds) Economic growth in Europe Since 1945. Cambridge University Press, Cambridge, pp 131–172
Bergin A, Kearney I (2004) Human capital, the labour market and productivity growth in Ireland. ESRI working paper no. 158
Bloom N (2014) Fluctuations in uncertainty. J Econ Perspect 28(2):153–176
Bloom N, Van Reenen J (2007) Measuring and explaining management practices across firms and countries. Q J Econ 122:1351–1408
Bloom N, Sadun R, Van Reenen J (2012) Americans do IT better: US multinationals and the productivity miracle. Am Econ Rev 102:167–201
Boltho A (1982) Introduction. In: Boltho A (ed) The European economy: growth and crisis. Oxford University Press, Oxford, pp 9–37
Bordo M (1993) The Bretton Woods international monetary system: a historical overview. In: Bordo M, Eichengreen B (eds) A retrospective on the Bretton Woods system: lessons for international monetary reform. University of Chicago Press, Chicago, pp 3–108
Bosworth BP, Collins SM (2003) The empirics of growth: an update. Brook Pap Econ Act 2:113–206
Broadberry SN (1998) How did the United States and Germany overtake Britain? A sectoral analysis of comparative productivity levels, 1870–1990. J Econ Hist 58:375–407
Brynjolfsson E, Hitt L (2003) Computing productivity: firm-level evidence. Rev Econ Stat 85:793–808
Buccirossi P, Clari L, Duso T, Spagnolo G, Vitale C (2013) Competition policy and economic growth: an empirical assessment. Rev Econ Stat 95:1324–1336
Caballero RJ, Lyons RK (1990) Internal versus external economies in European Industry. Eur Econ Rev 34:805–830
Caballero R, Cowan K, Engel E, Micco A (2004) Effective labor regulation and microeconomic flexibility. NBER working paper no. 10744
Cameron G, Wallace C (2002) Macroeconomic performance in the Bretton Woods Era and after. Oxf Rev Econ Policy 18:479–494
Campos NF, Coricelli F, Moretti L (2014) Economic growth and political integration: estimating the benefits from membership of the European Union using the synthetic counterfactuals method. CEPR discussion paper no. 9968
Cette G, Lopez J (2012) ICT demand behaviour: an international comparison. Econ Innov New Technol 21:397–410
Comin D, Hobijn B (2010) An exploration of technology diffusion. Am Econ Rev 100:2031–2059
Comin D, Hobijn B (2011) Technology diffusion and postwar growth. NBER Macroecon Annu 2010 25:209–259
Conway P, de Rosa D, Nicoletti G, SteinerF (2006) Regulation, competition and productivity convergence. OECD economics department working paper no. 509
Crafts N (2005) Interpreting Ireland’s economic growth. Background paper for UNIDO industrial development report 2005
Crafts N (2012) British relative economic decline revisited: the role of competition. Explor Econ Hist 49:17–29
Crafts N (2013) The Marshall Plan. In: Parker R, Whaples R (eds) Routledge handbook of major events in economic history. Routledge, London, pp 203–213
Crafts N (2014) Ireland’s medium term growth prospects: a phoenix rising? Econ Soc Rev 45:87–112
Crafts N (2015) Economic growth: onwards and upwards? Oxf Rev Econ Policy 31:217–241
Crafts N, Magnani M (2013) The golden age and the second globalization in Italy. In: Toniolo G (ed) The Oxford handbook of the Italian economy since unification. Oxford University Press, Oxford, pp 69–107
Crafts N, Mills TC (1996) Europe’s golden age: an econometric investigation of changing trend rates of growth. In: Van Ark B, Crafts N (eds) Quantitative aspects of postwar European economic growth. Cambridge University Press, Cambridge, pp 415–431
Crafts N, Mills TC (2005) TFP growth in British and German manufacturing, 1950–1996. Econ J 115:649–670
Crafts N, Toniolo G (2008) European economic growth, 1950−2005: an overview. CEPR discussion paper no 6863
Crouch C (1993) Industrial relations and European state traditions. Clarendon Press, Oxford
Cubel A, Sanchis MT (2009) Investment and growth in Europe during the Golden Age. Eur Rev Econ Hist 13:219–249
De Haan J, Sturm J-E (2000) On the relationship between economic freedom and economic growth. Eur J Polit Econ 16:215–241
De Long JB (1988) Productivity growth, convergence and welfare: comment. Am Econ Rev 78:1138–1154
De Long JB, Eichengreen B (1993) The Marshall Plan: history’s most successful adjustment program. In: Dornbusch R, Nolling W, Layard R (eds) Postwar economic reconstruction and lessons for the east today. MIT Press, Cambridge, MA, pp 189–230
Di Nino V, Eichengreen B, Sbracia M (2013) Real exchange rates, trade, and growth. In: Toniolo G (ed) The Oxford handbook of the Italian economy since unification. Oxford University Press, Oxford, pp 351–377
Dumke RH (1990) Reassessing the Wirtschaftswunder: reconstruction and post-war growth in West Germany in an international context. Oxf Bull Econ Stat 52:451–492
Eichengreen B (1993) Reconstructing Europe’s trade and payments. Manchester University Press, Manchester
Eichengreen B (1996) Institutions and economic growth: Europe after World War II. In: Crafts N, Toniolo G (eds) Economic growth in Europe Since 1945. Cambridge University Press, Cambridge, pp 38–72
Eichengreen B (2007) The European economy since 1945. Princeton University Press, Princeton
Eichengreen B, Boltho A (2008) The economic impact of European integration. CEPR discussion paper no. 6820
Eichengreen B, Ritschl A (2009) Understanding West German economic growth in the 1950s. Cliometrica 3:191–219
Eichengreen B, Uzan M (1992) The Marshall Plan: economic effects and implications for Eastern Europe and the former USSR. Econ Policy 7(14):13–75
Ergas H (1987) Does technology policy matter? In: Guile BR, Brooks H (eds) Technology and global industry. National Academy Press, Washington, DC, pp 191–245
Estevadeordal A, Taylor A (2013) Is the Washington consensus dead? Growth, openness and the great liberalization, 1970s–2000s. Rev Econ Stat 95:1669–1690
Frankel JA, Romer D (1999) Does trade cause growth? Am Econ Rev 89:379–399
Gilmore O (2009) Corporatism and growth: testing the Eichengreen hypothesis. MSc. Dissertation, University of Warwick
Giorcelli M (2017) The long-term effects of management and technology transfers. Mimeo, UCLA
Greenaway D, Milner C (1994) Determinants of the inter-industry structure of protection in the UK. Oxf Bull Econ Stat 53:265–279
Griffith R, Harrison R (2004) The link between product market regulation and macroeconomic performance. European Commission economic papers no. 209
Griffith R, Harrison R, Simpson H (2010) Product market reform and innovation in the EU. Scand J Econ 112:389–415
Gropp R, Kostial K (2000) The disappearing tax base: Is FDI eroding corporate income taxes? IMF working paper no. 00/173
Grossman G, Helpman E (1991) Quality ladders in the theory of growth. Rev Econ Stud 58:43–61
Gust C, Marquez J (2004) International comparisons of productivity growth: the role of information technology and regulatory practices. Labour Econ 11:33–58
Hall PA, Soskice D (2001) An introduction to varieties of capitalism. In: Hall PA, Soskice D (eds) Varieties of capitalism. Oxford University Press, Oxford, pp 1–68
Hanushek EA, Woessmann L (2012) Do better schools lead to more growth?: cognitive skills, economic outcomes, and education. J Econ Growth 17:267–321
Heckelman JC (2007) Explaining the rain: the rise and decline of nations after 25 years. South Econ J 74:18–33
Henriksen E, Midelfart Knarvik KH, Steen F (2001) Economies of scale in European manufacturing revisited. CEPR discussion paper no. 2896
Hickson K (2004) The postwar consensus revisited. Political Q 75:142–154
Ilzkovitz F, Dierx A, Kovacs V, Sousa N (2007) Steps towards a deeper economic integration: the internal market in the 21st century. European Economy Economic Papers no. 271
Jacks DS, Meissner CM, Novy D (2011) Trade booms, trade busts, and trade costs. J Int Econ 83:185–201
Janossy F (1969) The end of the economic miracle. IASP, White Plains
Jerzmanowski M (2007) Total factor productivity differences: appropriate technology vs. efficiency. Eur Econ Rev 51:2080–2110
Johansson A, Heady C, Arnold J, Brys B, Vartia L (2008) Taxation and economic growth. OECD Economics Department working paper no. 620
Kacprzyk A (2016) Economic freedom-growth Nexus in European Union countries. Appl Econ Lett 23:494–497
Kaldor N (1966) Causes of the slow rate of growth of the United Kingdom. Cambridge University Press, Cambridge
Kavanagh D, Morris P (1994) The rise and fall of consensus politics. In: Kavanagh D, Morris P (eds) Consensus politics from Attlee to Major. Blackwell, Oxford
Kindleberger CP (1967) Europe’s postwar growth: the role of labor supply. Harvard University Press, Cambridge, MA
Kneller R, Bleaney M, Gemmell N (1999) Fiscal policy and growth: evidence from OECD countries. J Public Econ 74:171–190
Lindert PH (2004) Growing public. Cambridge University Press, Cambridge
Lucas RE (1988) On the mechanics of economic development. J Monet Econ 22:3–42
Machin S, Wadhwani S (1989) The effects of unions on organisational change, investment and employment: evidence from WIRS Data. London School of Economics Centre for Labour economics discussion paper no. 355
Maddison A (1982) Phases of capitalist development. Oxford University Press, Oxford
Maddison A (1987) Growth and slowdown in advanced capitalist economies: techniques of quantitative assessment. J Econ Lit 25:649–698
Madsen JB (2007) Technology spillover through trade and TFP convergence: 135 years of evidence for the OECD countries. J Int Econ 72:464–480
Magacho GR, McCombie JSL (2017) Verdoorn’s law and productivity dynamics: an empirical investigation into demand and supply approaches. J Post-Keynesian Econ 40:600–621
Miles D, Yang J, Marcheggiano G (2013) Optimal bank capital. Econ J 123:1–37
Monteagudo J, Rutkovski A, Lorenzani D (2012) The economic impact of the services directive: a first assessment following implementation. European Economy Economic Papers no. 456
Morrison CJ (1988) Unraveling the productivity growth slowdown in the US, Canada and Japan: the effects of sub-equilibrium, scale economies and mark-ups. Rev Econ Stat 74:381–393
Nelson RR, Wright G (1992) The rise and fall of American technological leadership: the postwar era in historical perspective. J Econ Lit 30:1931–1964
Nickell SJ, Nicolitsas D, Dryden N (1997) What makes firms perform well? Eur Econ Rev 41:783–796
Nicoletti, G. and Scarpetta, S. (2005), Regulation and economic performance: product market reforms and productivity in the OECD. OECD Economics Department working paper no. 460
Obstfeld M, Taylor AM (2004) Global capital markets: integration, crisis and growth. Cambridge University Press, Cambridge
OECD (2007) Tax effects on foreign direct investment. OECD, Paris
Olson M (1982) The rise and decline of nations. Yale University Press, New Haven
Oulton N (1976) Effective protection of British industry. In: Corden WM, Fels G (eds) Public assistance to industry. Macmillan, London, pp 46–90
Prados de la Escosura L (2016) Economic freedom in the long run: evidence from OECD countries, 1850–2007. Econ Hist Rev 69:435–468
Prados de la Escosura L, Roses J, Sanz Villaroya I (2011) Economic reforms and growth in Franco’s Spain. Rev Hist Econ 30:45–89
Rafferty M (2005) The effects of expected and unexpected volatility on long-run growth: evidence from 18 developed countries. South Econ J 71:582–591
Ramey G, Ramey VA (1995) Cross-country evidence on the link between volatility and growth. Am Econ Rev 85:1138–1151
Rodrik D (2000) How far will international economic integration go? J Econ Perspect 14(1):177–186
Rodrik D (2008) The real exchange rate and growth. Brook Pap Econ Act (Fall):365–412
Romalis J (2007) Capital taxes, trade costs, and the Irish miracle. J Eur Econ Assoc 5:459–469
Romer PM (1986) Increasing returns and long-run growth. J Polit Econ 94:1002–1037
Rossi N, Toniolo G (1996) Italy. In: Crafts N, Toniolo G (eds) Economic growth in Europe since 1945. Cambridge University Press, Cambridge, pp 427–454
Summers R, Heston A (1984) Improved international comparisons of real product and its composition, 1950–1980. Rev Income Wealth 30:207–262
Sumner M (1999) Long-run effects of investment incentives. In: Driver C, Temple J (eds) Investment, growth and employment: perspectives for policy. Routledge, London, pp 292–300
Tanzi V (1969) The individual income tax and economic growth. Johns Hopkins University Press, Baltimore
Temin P (2002) The Golden Age of European growth reconsidered. Eur Rev Econ Hist 6:3–22
The Conference Board (2016) The Conference Board Total Economy Database, May 2016. http://www.conference-board.org/data/economydatabase/
Timmer M, Inklaar R, O’Mahony M, van Ark B (2010) Economic growth in Europe: a comparative economic industry perspective. Cambridge University Press, Cambridge
Van Ark B (1996) Sectoral growth accounting and structural change in postwar Europe. In: Van Ark B, Crafts N (eds) Quantitative aspects of postwar European economic growth. Cambridge University Press, Cambridge, pp 84–164
van Ark B, Melka J, Mulder N, Timmer M, Ypma G (2003) ICT investments and growth accounts for the European Union. Groningen Growth and Development Centre Research Memorandum GD−56
Van der Wee H (1986) Prosperity and upheaval: the world economy, 1945–1980. Penguin Books, Harmondsworth
Vonyo T (2008) Post-war reconstruction and the Golden Age of economic growth. Eur Rev Econ Hist 12:221–241
Voth H-J (2003) Convertibility, currency controls, and the cost of capital in Western Europe, 1950–1999. Int J Financ Econ 8:255–276
Woessmann L, Ludemann E, Schutz M, West MR (2007) School accountability, autonomy, choice and the level of student achievement: international evidence from PISA 2003. OECD education working paper no. 13
Wren C (1996) Industrial subsidies: the UK experience. Macmillan, London
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2018 Springer-Verlag GmbH Germany, part of Springer Nature
About this entry
Cite this entry
Crafts, N. (2018). The Golden Age of European Economic Growth. In: Diebolt, C., Haupert, M. (eds) Handbook of Cliometrics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-40458-0_35-1
Download citation
DOI: https://doi.org/10.1007/978-3-642-40458-0_35-1
Received:
Accepted:
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-40458-0
Online ISBN: 978-3-642-40458-0
eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences
Publish with us
Chapter history
-
Latest
The Golden Age of European Economic Growth- Published:
- 18 January 2024
DOI: https://doi.org/10.1007/978-3-642-40458-0_35-2
-
Original
The Golden Age of European Economic Growth- Published:
- 03 August 2018
DOI: https://doi.org/10.1007/978-3-642-40458-0_35-1