Industrial Productivity in Europe
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Industrial Productivity in Europe

Growth and Crisis

Edited by Matilde Mas and Robert Stehrer

This book analyzes growth at the total economy and industry level from an international perspective, providing unique cross-country comparisons. The authors focus on the EU-25 countries but also include the US, Japan and Korea. The chapters explore growth patterns from a long-run perspective, although greater attention is paid to the period of expansion from 1995–2007 and the post 2008 period of crisis. Each contribution builds on a common methodology based on a detailed database providing a high degree of disaggregation with respect to the industries and factors accounting for growth. The role played by ICT is expertly emphasized, in particular the different paths followed in the US and the EU.
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Chapter 11: Productivity Convergence Across Industries and Countries: The Importance of Theory-based Measurement

Robert Inklaar and Marcel P. Timmer


Robert Inklaar and Marcel P. Timmer 11.1 INTRODUCTION Comparative productivity levels are an important ingredient in crosscountry studies of economic growth. Initially, this research was mainly focused on explaining patterns of convergence and divergence at the aggregate level.1 More recently, studies on the differences in performance at the sectoral level (agriculture, manufacturing and services) have appeared, motivated by the influential study by Bernard and Jones (1996), henceforth BJ. They found that across a set of selected OECD countries, convergence at the aggregate does not necessarily imply convergence at the industry level. In particular they found that during the period 1970–87 manufacturing showed little evidence of productivity convergence, in contrast to the services sector in which convergence was strong. These findings have not been undisputed. Sørensen (2001) showed that the finding of non-convergence in manufacturing heavily depended on the choice of a set of purchasing power parities (PPPs) to convert national currencies into comparable units. BJ used one set of aggregate GDP PPPs to convert all sectoral variables. However, as sectoral prices do not move in tandem over time, the sectoral findings of BJ became highly sensitive to the choice of the base year for the aggregate PPPs. Typically, manufacturing prices grow much slower than prices of services and a common PPP would not capture this difference. In their reply, BJ conclude that: ‘future research is needed to construct conversion factors appropriate to each sector and that research relying on international comparisons of sectoral productivity and income should proceed...

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