What Sectors Make the Poor Countries So Unproductive?
Berthold Herrendorf () and
Akos Valentinyi ()
No 5399, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Standard growth accounting exercises find large cross-country differences in aggregate TFP. Here we ask whether specific sectors are driving these differences, and, if this is the case, which these problem sectors are. We argue that to answer these questions we need to consider four sectors. In contrast, the literature typically considers only two sectors. Our four sectors produce services (nontradable consumption), consumption goods (tradable consumption), construction (nontradable investment), and machinery and equipment (tradable investment). Interacting the data from the 1996 benchmark study of the Penn World Tables with economic theory, we find that the TFP differences across countries are much larger in the two tradable sectors than in the two nontradable sectors. This is consistent with the Balassa--Samuelson hypothesis. We also find that within the tradable sectors the TFP differences are much larger in machinery and equipment than in consumption goods. We illustrate the usefulness of our findings by accounting for the conflicting results of the existing two--sector analyses and by developing criteria for a successful theory of aggregate TFP.
Keywords: development accounting; relative prices; sector TFPs (search for similar items in EconPapers)
JEL-codes: O14 O41 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at firstname.lastname@example.org
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:5399
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=5399
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().