Productivity across Industries and Countries: Time Series Theory and Evidence.

The authors examine whether convergence in aggregate productivity is also occurring at the industry level in fourteen OECD countries from 1970 to 1987. Using both cross-section and time-series methods, they find convergence in some sectors, such as services. However, surprisingly, the authors find that convergence does not hold for the manufacturing sector. Decomposing aggregate convergence into industry productivity gains and changing sectoral shares of output, they find the service sector to be responsible for the bulk of cross-country convergence to the United States. The authors develop a new result on the asymptotic normality of panel unit root estimators to formally test within-sector convergence. Copyright 1996 by MIT Press.