Vive la différence: Disaggregation of the productivity convergence process

This paper examines the convergence process at a disaggregated level in a historical context. A three-way disaggregation of the national accounts by output, income and expenditure reveals a wealth of diversity, bom over time and across countries, i.e. history and geography matter. Countries can specialise according to comparative advantage, and convergence at the aggregate level can occur through changes in structure as well as through convergence at the micro level. Similarly, changes in factor proportions may lead to convergence of aggregate incomes without requiring convergence of all factor prices at the micro level. Also, differences in preferences may persist, so that individual components of expenditure do not need to converge in line with aggregate expenditure. Convergence at the aggregate level, dren, does not necessarily lead to uniformity. Vive la différence!