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 persistently 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 decomposition framework based on Data Envelopment Analysis (DEA) to reconcile these findings. We conclude that by 1936 inefficient assimilation of modern production techniquesand not the use of different techniquesaccounted for most of the U.S./German labor-productivity gap. Our findings call for a reappraisal of the drivers behind cross-country differences in manufacturing performance.