Disaggregate productivity comparisons: sectoral convergence in OECD countries |
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Authors: | Johannes Van Biesebroeck |
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Institution: | (1) Centre for Economic Studies, K.U. Leuven, Naamsestraat 69, 3000 Leuven, Belgium;(2) University of Toronto, Toronto, ON, Canada;(3) NBER, Cambridge, MA, USA |
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Abstract: | International comparisons of productivity have used exchange rates or purchasing power parity (PPP) to make output comparable
across countries. While aggregate PPP holds well in the long run, sectoral deviations are persistent. It raises the need for
a currency conversion factor at the same level of aggregation as the output that is compared. Mapping prices from household
expenditure surveys into the industrial classification of sectors and adjusting for taxes and international trade, I obtain
an expenditure-based sector-specific PPP. Using detailed price data for up to 8 years between 1970 and 1999, I test whether
the sectoral PPPs adequately capture differential changes in relative prices between countries. They work well for agriculture
and the majority of industrial sectors, but not for most service sectors and for manufacturing sectors that produce differentiated
products. Using the most appropriate conversion factor for each industry, productivity convergence is found to be taking place
in all but a few industries for a group of 14 OECD countries. The latter results are robust to the base year used for the
currency conversion. |
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Keywords: | |
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