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The Manufacturing Sector Did Contribute to Convergence Among the OECD Countries

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Abstract

This paper revisits the role of sectors in aggregate convergence. The existing evidence is inconclusive because its methodology depends sensitively on the conversion factor used to compare sectoral productivity levels across countries. This paper proposes a robust methodology -- ß-decomposition - to directly estimate how much the productivity growth in each sector and between -sector restructuring contribute to convergence. This methodology avoids the sectoral PPP-conversion-factor problem because it compares only sectoral growth rates and shares -- not levels -- across countries. The evidence suggests that productivity growth in both manufacturing and services were important in driving aggregate productivity convergence among the OECD countries. The results are robust to the choice of base year.

Suggested Citation

  • Wei-Kang WONG, 2002. "The Manufacturing Sector Did Contribute to Convergence Among the OECD Countries," Departmental Working Papers wp0215, National University of Singapore, Department of Economics.
  • Handle: RePEc:nus:nusewp:wp0215
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    1. Bernard, Andrew B & Jones, Charles I, 1996. "Productivity across Industries and Countries: Time Series Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 135-146, February.
    2. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    3. Barro, Robert J & Sala-i-Martin, Xavier, 1997. "Technological Diffusion, Convergence, and Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 1-26, March.
    4. Baily, Martin Neil & Bartelsman, Eric J & Haltiwanger, John, 1996. "Downsizing and Productivity Growth: Myth or Reality?," Small Business Economics, Springer, vol. 8(4), pages 259-278, August.
    5. John Haltiwanger, 2000. "Aggregate Growth: What Have We Learned from Microeconomic Evidence?," OECD Economics Department Working Papers 267, OECD Publishing.
    6. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters,in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc.
    7. Bernard, Andrew B & Jones, Charles I, 1996. "Productivity and Convergence across U.S. States and Industries," Empirical Economics, Springer, vol. 21(1), pages 113-135.
    8. Martin Neil Baily & Eric J. Bartelsman & John Haltiwanger, 2001. "Labor Productivity: Structural Change And Cyclical Dynamics," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 420-433, August.
    9. Andrew B. Bernard & Charles I. Jones, 2001. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries: Reply," American Economic Review, American Economic Association, vol. 91(4), pages 1168-1169, September.
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    11. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    12. Elhanan Helpman & David T. Coe, 1993. "International RandD Spillovers," IMF Working Papers 93/84, International Monetary Fund.
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    More about this item

    Keywords

    Convergence; ß-Decomposition; Shift-Share Decomposition; Sectoral Decomposition;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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