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Disaggregate Productivity Comparisons: Sectoral Convergence in OECD Countries

Johannes Van Biesebroeck ()

Working Papers from University of Toronto, Department of Economics

Abstract: International comparisons of productivity have used exchange rates or purchasing power parity (PPP) to make output comparable across countries. While aggregate PPP holds well in the long run, sectoral deviations are very persistent. It raises the need for a currency conversion factor at the same level of aggregation as the output that is compared. Mapping prices from household expenditure surveys into the industrial classification of sectors and adjusting for taxes and international trade, I obtain an expenditure-based sector-specific PPP. Using detailed price data for 1985, 1990, 1993, and 1996, I test whether the sectoral PPPs adequately capture differential changes in relative prices between countries. For agriculture and the majority of industrial sectors, but not for most service sectors, sectoral PPP is preferred over aggregate PPP. Using the most appropriate conversion factor for each industry, productivity convergence is found to be taking place in all but a few industries for a group of 14 OECD countries. The results are robust to the base year used for the currency conversion.

Keywords: PPP; sectoral comparison; base year (search for similar items in EconPapers)
JEL-codes: D24 F14 F31 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eff and nep-int
Date: 2007-06-18
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Related works:
Journal Article: Disaggregate productivity comparisons: sectoral convergence in OECD countries (2009) Downloads
Working Paper: Cross-country Conversion Factors for Sectoral Productivity Comparisons (2004) Downloads
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