Lessons from Productivity Comparisons of Germany, Japan, and the United States

Germany, Japan and the United States are the three largest mature economies and set the productivity frontier in most industries. In aggregate, Germany caught up to US productivity by the 1990s but Japan remains well below the leaders and has the potential for faster growth. The article estimates the industry productivity leaders in the 1990s and whether lagging industries subsequently caught up to the leader. Germany lags the United States in some industries, like electronics, but has the advantage of worker training programs. US and German productivity slowed with the decline in global innovation. Japan lags behind US service sector productivity. Its manufacturing industries set the productivity frontier in the 1990s but have since fallen behind. Japan has low productivity small firms and lacks effective competition.