The Contribution of Growth in the Capital-Labor Ratio 1. Other countries have converged rapidly towards productivity levels in the United States because they have had a more rapid growth rate in their capital-labor ratios. More rapid investment can help the United States maintain both a rising standard of living and its leading position in productivity. B.The Contribution of Technical Change 1. Both Germany and Japan get a greater boost to labor productivity growth from technical change than does the United States.
Structural effects help to account for differences.
The large shifts in economic activity away from the agricultural industry in Germany and Japan have tended to raise overall productivity. Technology transfer from the United States to Germany and Japan has also increased their productivity growth. The foreign trade effect helps to account for differences in technical change in the United States and technical change in Germany and Japan. Free trade after World War II gave an advantage to follower countries because it increased competition in smaller economies where monopolies once flourished and because it allowed smaller countries to take advantage of large size. The Contribution of Education 1.