World TFP

We construct a measure of global TFP growth that covers output of the world's forty largest economies. We decompose this measure to address questions such as, which countries and industries are the main sources of global productivity growth? And how has globalization, by reducing misallocation of resources across global producers, contributed to world productivity? We thus quantify how the world production frontier has shifted out over time and, in a proximate sense, the geographic and industry sources of growth. We also discuss the geographic and industry sources of cost pressures, as well as the extent to which reallocation reflects relative unit production costs. Among other findings, reduced misallocation was more important in the 1990s than in the 2000s. And TFP growth in frontier economies slowed in the runup to the Great Recession. But world TFP growth remained strong because of a speedup in TFP growth in emerging economies. Finally, we discuss implications for understanding patterns of world trade.