PRODUCTIVITY CONVERGENCE ACROSS INDUSTRIES AND COUNTRIES: THE IMPORTANCE OF THEORY-BASED MEASUREMENT

• Published in: Macroeconomic dynamics Vol. 13; no. S2; pp. 218 - 240
• Main Authors: Inklaar, Robert, Timmer, Marcel P.
• Format: Journal Article
• Language: English
• Published: New York, USA Cambridge University Press 01.09.2009
• Subjects: Capital assets; Economic growth; Economic theory; International comparisons; Macroeconomics; Manufacturing; Productivity measurement; Sectoral Trends; Economic Growth; Productivity Measurement; Convergence
• ISSN: 1365-1005; 1469-8056
• DOI: 10.1017/S1365100509090117

Cross-country studies of economic growth have been hampered by the scarcity of reliable data on productivity at the industry level; see Bernard and Jones [American Economic Review, 91 (4) (2001), 1168–1169] and Rogerson [Journal of Political Economy, 116 (2) (2008), 235–259]. We bring together literature on industry prices, human capital, and capital assets to construct industry-level productivity measures that are well grounded in neoclassical production theory. These theory-based measures differ widely from the crude measures commonly used in the literature. We use these to confirm and strengthen the finding of Bernard and Jones [American Economic Review, 86 (5) (1996), 1216–1238] that for advanced OECD countries, patterns of convergence across sectors have differed since 1970: whereas productivity in market services converged, there is no convergence in manufacturing. More detailed analysis confirms that patterns of convergence are highly industry-specific. There is no dominant convergence trend in sectoral productivity growth across advanced countries.