Abstract
Since the 1980s the expansion of the western economy has been characterised by the so-called third industrial revolution of information and communication technologies (after the first and the second revolutions of respectively steam technology and electrification/motorisation). Characteristic of the present process is that the advent of the knowledge economy so far has created much larger welfare gains in the United States as compared to Europe. In fact, hundred years ago, by the start of the twentieth century, Europe faced a similar situation. During this second industrial revolution the European economy was also outperformed by the United States, especially in manufacturing and market services. Existing theories and approaches explaining this gap are based on quantitative evidence for the total economy (such as relative prices of labour and capital, resource endowments or the size of the market) or look at economic behaviour of individual companies. The present study however concentrates on the comparative study of sectors, and aims to build a bridge between the vicissitudes of individual companies and the performance of the total economy. It analyses the sectoral composition and sectoral growth in the European economies to explain the nature of the welfare gap between Europe and the technology leader, the United States in the first half of the twentieth century. What were the reasons why Europe lost track, can we identify in what technologies or industries this became visible, and how can we account for the effects of the world wars and the Great Depression? The strength of a systematic comparative approach is that it provides the instruments to overcome the traditional fragmentation and myopia of economic histories focused on one nation only. The strategic aim of the proposal is to create a transnational research infrastructure for the comparative study of European economies.