Productivity convergence in manufacturing in the Eurozone: a hierarchical panel data approach

Guohua Feng, Bin Peng and Chuan Wang

Macroeconomic Dynamics, 2025, vol. 29, -

Abstract: This paper investigates both conditional and unconditional convergence in labor productivity within the manufacturing industries of the Eurozone over the period 1963 – 2018. We employ two innovative models: constant and varying-coefficient hierarchical panel data convergence regression models, each equipped with two sets of latent factor structures—one comprising global factors and the other industry-specific factors. These models offer distinct advantages, allowing for both global and industry-specific cross-sectional dependencies and permitting parameter heterogeneity across individual industries. Our findings reveal both conditional and unconditional convergence across the manufacturing industry as a whole, as well as among the majority of the 23 sub-manufacturing industries at the ISIC two-digit level. Moreover, we observe significant variation in convergence dynamics among these sub-manufacturing industries. Robustness checks, performed across different subperiods, confirm the reliability of our results. Furthermore, a comparison of our model’s outcomes with those of two alternative models provides additional support for our conclusions.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:29:y:2025:i::p:-_109

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