Productivity homogenisation trends of six advanced industrial economies: A vertically hyper-integrated approach

Abstract

The present paper applies an Input-Output accounting framework, based on the logical device of vertical hyper-integration, to measure productivity trends across six advanced industrial economies (US, Germany, Japan, UK, France and Italy) during recent decades. Rather than measuring performance from the income side of the economy, as in traditional TFP growth analyses, disaggregated productivity changes are approximated from the expenditure side, i.e. the nominal counterpart to the system of physical quantities. Empirical findings suggest that the central tendency for convergence of hyper-integrated productivity levels across countries within each growing subsystem between 1995 and 2007 has been reversed between 2007 and 2015. And while service subsystems coincided in their direction of change, primary-cum-manufacturing sectors experienced more heterogeneous dynamics. Moreover, productivity gains accruing to wages were amongst the lowest in the three economies with highest overall hyper-integrated labour productivity growth.