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The Golden Age of European Economic Growth

A Cliometric Perspective

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.

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Notes

  1. 1.

    Their results show that this did not apply prior to 1950.

  2. 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. 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. 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. 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. 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. 7.

    More details of how it worked can be found in Crafts (2013).

  8. 8.

    See Eichengreen (1993) which also contains a detailed description of the logic and mechanics of EPU.

  9. 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. 10.

    The six founder members were Belgium, France, Germany, Italy, Luxembourg and Netherlands.

  11. 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. 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. 13.

    Some countries have improved test scores quite rapidly, notably, Finland while elsewhere, for example, Italy, there is retrogression.

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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

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    The Golden Age of European Economic Growth
    Published:
    18 January 2024

    DOI: https://doi.org/10.1007/978-3-642-40458-0_35-2

  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