Preliminary Programme

The war years coincide with the beginning of the Great Compression (see Goldin and Margo 1992), which dramatically decreased inequality between the 10th and 90th percentiles of the wage distribution until the 1970s. Wartime wage restrictions and the changing return to skills have been targeted as explanations for the narrowing of the wage gap between top and bottom earners during this period. This paper builds on previous research that documents greater population growth in counties that received relatively more war spending (Cullen and Fishback 2008) and lower educational attainment among the school age cohort most affected by mobilization due to inductions and war spending (Jaworski 2011). We consider (1) how migration into counties that received war spending during the 1940s contributed to the change in the distribution of wages now called the Great Compression and (2) whether subsequent out-migration followed demobilization and worked to affect the changing role of skills in the postwar economy. (Show less)

During World War II labor productivity in German armament industries grew considerably. Recent studies have shown that this growth was not only - as could be expected given the complexity of armaments' manufacturing - caused by learning effects but also by a process of considerably heightened outsourcing: the inter-firm division of labor in the armament industries increased significantly during these years. However, the motives for and organization of this outsourcing process are little known. And did this outsourcing have long-term effects on the German economy or did it constitute only a short-term phenomenon brought about by the specific wartime circumstances? To address these questions our paper discusses first the several motives and circumstances leading to the outsourcing of intermediate goods, such as components of weapons, to other companies in Germany and in Europe under Nazi rule. In the second part we analyze the supplier network of Germany's most important aircraft program - the construction of the heavy bomber JU 88 - primarily based on annual audit reports of many companies involved in the different production stages of the JU 88. It will be shown that outsourcing was not only limited to manufacturers involved in the final assembly of aircrafts. Companies producing components, too, increased their outsourcing significantly. Finally, we show that many suppliers of the German aircraft industry later became suppliers of West Germany's booming car industry after World War II, a development probably of vital importance to its success story. (Show less)

This paper investigates the impact of World War II on the relative productivity performance of the three major western belligerents, Germany, Britain and the United States in manufacturing. Partially drawing on previous work, we present two consistent labour-productivity benchmarks for 20 industry groups: comparing the USA with the UK in 1935 and 1950, and West Germany with the UK in 1935/6 and 1951. We follow the industry-of-origin approach using industry PPPs as currency conversion factor. Overall, we find that the US productivity lead over Europe was extended across the 1940s. By contrast, Germany fell behind substantially even compared to Britain. West Germany commanded an 8% lead in manufacturing value-added per working hour in 1936, but was lagging behind its major European rival by about 13% in 1951.
Second, we use decomposition analysis to determine the industry origins of relative labour-productivity growth across the war. We isolate the impact of structural change from intra-sector effects, and estimate the relative contribution of each industry group to shifts in the relative productivity position of the three economies. We find that America’s pulling ahead and Germany’s falling behind was driven by industries critical for the war effort, such as iron and steel, chemicals, machinery and vehicles.
Third, we provide industry-level growth accounts for West Germany and the US between 1939 and 1944, in order to show whether productivity in the war industries had already begun to diverge during the war, or whether this divergence resulted entirely from differences in the scale of war-induced dislocation after 1945. While US manufacturing achieved enormous efficiency gains the falling behind of Germany in the productivity race began before the collapse of the Nazi war economy. Between 1939 and 1944, West German industrial TFP declined by three per cent. Overinvestment in heavy industry and the increasingly acute shortage of skilled labour depressed capital productivity. By contrast, the production miracle in American industry was driven by labour expansion and improved capacity utilisation, which was made possible by the fact that US output had been substantially below its full employment level before 1941. (Show less)

We make a pioneer, largely data-driven, effort to first collect and examine available piecemeal data and information for the period from the mid 1930s to the early 1950s, and then construct them in a systematic way that satisfies the standard industry level productivity analysis. In addition to the empirical investigation on how the Chinese economy was significantly affected by defense-oriented resource mobilization and restructuring to resist the Japanese invasion (1937-45) and to fight the communists during by the civil war (1946-49), we also examine the likely impact of wartime institutional changes, especially the role of the state in the economic affairs, on the post-war economic development. (Show less)