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Sectoral Productivity, Structural Change and Convergence

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  • Alison Stegman

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Abstract

The concept of convergence, defined either narrowly, through productivity or income per capita, or broadly, across a range of economic variables, has become fundamental to the way we assess, analyse and project economic growth in developing economies. To the extent that economic growth projections are designed to reflect empirical behaviour, there is a need to identify relationships between and within key projection variables. To date the empirical analysis of convergence has been controversial. There is a strong argument that economic growth should be projection at a detailed sectoral level (see McKibbin et al (2009)). In practice, data limitations mean that industry level relationships are difficult to uncover and macroeconomic aggregate behaviours are often imposed on disaggregated data. The analysis in this paper attempts to uncover the key cross country trends in sectoral level productivity data. Whilst productivity convergence is evident in some sectors, generally service sectors, it is not evident in others. In part, aggregate convergence trends across developed economies appear to be driven by structural change. We generalise this result and argue that a combination of convergence and structural development assumptions could improve the empirical relevance of economic growth projection models.

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File URL: http://cama.crawford.anu.edu.au/pdf/working-papers/2011/322011.pdf
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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2011-32.

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Length: 45 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:een:camaaa:2011-32

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  1. Xavier Sala-i-Martin, 2001. "15 years of new growth economics: What have we learnt?," Economics Working Papers 620, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2002.
  2. Dale W. Jorgenson & Marcel P. Timmer, 2011. "Structural Change in Advanced Nations: A New Set of Stylised Facts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 1-29, 03.
  3. Martin Carree & Luuk Klomp, 1997. "Testing The Convergence Hypothesis: A Comment," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 683-686, November.
  4. McKibbin, Warwick J. & Pearce, David & Stegman, Alison, 2007. "Long term projections of carbon emissions," International Journal of Forecasting, Elsevier, vol. 23(4), pages 637-653.
  5. Vries, Gaaitzen J. de & Los, Bart & Castellacci, Fulvio, 2010. "Sectoral Productivity Trends:Convergence Islands in Oceans of Divergence," GGDC Research Memorandum GD-118, Groningen Growth and Development Centre, University of Groningen.
  6. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
  7. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-38, December.
  8. Phillips, Peter C.B. & Sul, Donggyu, 2007. "Some empirics on economic growth under heterogeneous technology," Journal of Macroeconomics, Elsevier, vol. 29(3), pages 455-469, September.
  9. Peter C. B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Econometrica, Econometric Society, vol. 75(6), pages 1771-1855, November.
  10. Warwick J. McKibbin & Alison Stegman, 2005. "Convergence And Per Capita Carbon Emissions," CAMA Working Papers 2005-10, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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