The wartime origins of the Wirtschaftswunder: the growth of West German industry, 1938-55

The paper offers a detailed quantitative account of industrial development in West Germany between 1938 and 1955. It presents value-added, labour and capital input, labour productivity and TFP at industry level. Even though productivity growth was rapid by historical standards in the reconstruction phase after 1948, the expansion of industrial production between 1938 and 1955 was entirely input-driven. The resulting backlog in productivity growth allowed German industry to retain remarkably high growth rates until the end of the Golden Age. The post-war productivity gap took a decade to close after 1945 because the economy remained dislocated for much longer than previously thought. The main dislocating factors besides labour misallocation resulting from the war-induced urban housing shortage were structural disproportions in industrial production caused by the division of Germany. During the Wirtschaftswunder, industrial recovery could tap into surplus capacity and increased market potential.