Economic Growth and Development

countries owing to higher migration levels. In general the contribution of
labour to growth has been promoted by higher levels of human capital (educa-
tion) and undermined by declining hours and slowing population growth.
There were across-the-board slowdowns in the growth rates of factors of
production (labour and capital) and also in growth of TFP after 1973. In Japan,
for example, TFP growth was 3.6 per cent between 1950 and 1973 and only 1.0
per cent between 1973 and 1992. Although we have characterized TFP as driv-
ing growth in developed countries it nevertheless slowed dramatically in
absolute terms after 1973. Scholars are still not clear what explains this general
effect across the developed world.

Growth accounting and developing countries
Table 2.6 shows that, contrary to the Solow hypothesis, capital made a larger
contribution to growth than productivity (TFP) in developing countries.
Population growth also tends to be higher in developing countries and this is

Growth in the Modern World Economy since 1950 57

Table 2.4 Labour productivity in now-developed countries, 1870–1998

UK US Japan

GDP per hour worked (1990 $)

1870 2.55 2.25 0.46

1913 4.31 5.12 1.08

1950 7.93 12.65 2.08

1973 15.97 23.72 11.57

1998 27.45 34.55 22.54

Source: Data compiled from Maddison (2006:351).

Table 2.5 Growth-accounting breakdown of sources of growth

(average annual percentage changes)

Capital (%) Labour (%) TFP (%) Output

1950–73

Japan 3.1 (34%) 2.5 (27%) 3.6 (39%) 9.2

UK 1.6 (53%) 0.2 (7%) 1.2 (40%) 3.0

US 1.0 (26%) 1.3 (33%) 1.6 (41%) 3.9

West Germany 2.2 (37%) 0.5 (8%) 3.3 (55%) 6.0

1973–92

Japan 2.0 (53%) 0.8 (21%) 1.0 (26%) 3.8

UK 0.9 (53%) 0.0 (0%) 0.7 (44%) 1.6

US 0.9 (38%) 1.3 (54%) 0.2 (8%) 2.4

West Germany 0.9 (39%) –0.1 (–4%) 1.6 (65%) 2.3

Source: Data compiled from Crafts (1999:25).