Question

Why has productivity growth in the U.S. been more rapid than in the other industrialized countries?

A) Because of the greater flexibility of U.S. labor markets and the greater efficiency of the financial system.

B) Because the U.S. government has more restrictive but also more effective regulations that makes the labor and output markets more efficient.

C) Because the opportunity cost of being unemployed is lower in the U.S. than in other countries.

D) All of the above.

Group of answer choices

Answer 1

(A) Because of the greater flexibility of U.S. labor markets and the greater efficiency of the financial system.

Reason: Since 1990, other high-income countries have not been able to catch up with the United States in terms of real GDP per capita, in fact, they have fallen further back and the gap has in fact increased.

There are mainly two reasons for this, high flexibility in the U.S. labor market and high efficiency in the U.S. financial market. As compared to many European countries, it is much easier for a worker to quit and join another job suitable to his skills in the U.S. As a result, the labor productivity is much higher in the U.S.

In Europe, a worker remains unemployed for a because government policy does not allow them tire a wrong man for the wrong job. Therefore, a worker on getting a job also does not leave It very easily, although he may not be having the required skills for the job. This affects labor productivity adversely.

It's difficult to implement a new technology in Europe therefore workers cannot be given different kinds of jobs to do, they cannot be asked to work for longer hours, or work during the night.

Workers don't learn new skills. In the U.S. workers start working at an early age and retire much later, Unemployed workers get financial help from government for a shorter period as compared to Europe or Canada.
Therefore,unemployment rates are higher in those countries as compared to the U.S.

Workers learn more skills as they are employed which increases their productivity and the real GDP per capita. In the financial markets the investor receive, legal protection as a result even foreign investors are encouraged to invest in the U.S.

The buying and selling of stocks is quick and smooth in the U.S. For new firms venture capital firms arrange for funds and help them raise capital. Firms like Google raised their funds by the help of venture capital firms. As the result, number of new firms manufacturing new products has been able to set them up as they are high tech firms.