Cross-country comparisons of industry total factor productivity: theory and evidence
International trade economists typically assume that TFP for each industry is the same in every country. This paper casts doubt on this hypothesis, finding large and persistent TFP differences across countries. The paper considers measurement issues in depth, and a methodology for international TFP comparisons is described. This methodology is applied to a dataset on prices, inputs, and outputs for a group of industrialized countries in the 1980s. The paper finds that the United States was the TFP leader in machinery and equipment during the 1980s, with Japan slightly behind. These results are compared to the previous literature on disaggregated TFP comparisons.
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