NEW INTERNATIONAL COMPARISONS OF PRODUCTIVITY PERFORMANCE: A SECTORAL ANALYSIS AND A COMPARISON OF UK PERFORMANCE

In this paper we present several new measures of gross-output-based total factor (multifactor) productivity (TFP) at the sectoral level for manufacturing industries in the G7 economies. We calculate measures of both total factor productivity growth and comparative productivity levels. These are obtained by combining conventional OECD sectoral data on labour and capital inputs with data on intermediate inputs from national input-output tables. Additionally, we derive cyclically corrected measures of TFP growth that avoid the distortions contained in traditional measures of productivity growth. Consequently we argue that our measures provide a more accurate description of the underlying rate of productivity growth in the G7 economies. Our evidence shows little convergence of productivity in other G7 countries to US levels. A key conclusion from the UK’s perspective is that in manufacturing, the productivity gap with other major industrialised countries, especially the USA and Germany, is bigger than has been reported in other recent studies (O’Mahony, 1999, HM Treasury, 2000).