The Yankees of Europe? A New View on Technology and Productivity in German Manufacturing in the Early Twentieth Century

Labor productivity in German manufacturing lagged behind the United States in the early twentieth century. Traditionally, this is attributed to dichotomous technology paths across the Atlantic. However, various industry case studies suggest rapid diffusion of U.S. technologies in Germany. We develop a novel framework to reconcile these findings. Labor-productivity gaps are decomposed into differences in technology and differences in the efficiency with which technology is used. We find that by 1936 in the majority of industries inefficient assimilation of modern technologies - and not the use of different technology - accounted for most of the U.S./German labor-productivity gap.