COMPARING SECTORAL PRODUCTIVITY ACROSS COUNTRIES

Renewed interest in economic growth has encouraged studies of how different sectors have contributed to convergence trends. Comparing productivity levels across countries is notoriously tricky, but one attractive approach has been to deflate sector value added by the PPP exchange rate for GDP. There is a quite fundamental problem with this approach which, by measuring the purchasing power of sectoral incomes over GDP, biases the result towards reflecting the difference in GDP per head. In less extreme form the same problem applies to the use of a PPP for gross output of that sector. ...