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Estimation of Cross-Country Differences in Industry

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  • James Harrigan
Abstract
Many economists and policy makers are concerned about international differences in technology and labor quality, correctly seeing these issues as crucial to long term growth in living standards. Typically, international trade economists assume that technological knowledge is the same in all countries, and that production processes exhibit constant returns to scale. An equivalent way of stating this assumption is that total factor productivity (TFP) for each industry is the same in every country. This paper is a contribution to a growing body of work which casts doubt on this hypothesis, finding large and persistent TFP differences across countries. The paper uses a new data set on prices, inputs, and outputs for a group of industrialized countries in the 1980s. In addition to calculating industry-specific TFP indexes over time and across countries, the paper uses panel data econometric techniques to examine the sources of the observed large TFP differences across countries. Two hypotheses are examined to account for TFP differences: constant returns to scale production with country-specific technological differences economies with identical technology in each country. The data support the constant returns/different technology hypothesis over the increasing returns/same technology hypothesis.

Suggested Citation

  • James Harrigan, 1997. "Estimation of Cross-Country Differences in Industry," NBER Working Papers 6121, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6121
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    References listed on IDEAS

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    1. Bernard, Andrew B & Jones, Charles I, 1996. "Productivity across Industries and Countries: Time Series Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 135-146, February.
    2. Harrigan, James, 1997. "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model," American Economic Review, American Economic Association, vol. 87(4), pages 475-494, September.
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    Cited by:

    1. James Harrigan, 1997. "Cross-country comparisons of industry total factor productivity: theory and evidence," Research Paper 9734, Federal Reserve Bank of New York.
    2. Berthold Herrendorf & Arilton Teixeira, 2007. "Technology adoption: on the non equivalence of tariffs and quotas," Brazilian Business Review, Fucape Business School, vol. 4(3), pages 195-217, September.
    3. J.E. Haskel & M.J. Slaughter, 1998. "Does the Sector Bias of Skill-Biased Technical Change Explain Changing Wage Inequality?," Working Papers 386, Queen Mary University of London, School of Economics and Finance.
    4. Eliseo Díaz González, 2006. "La productividad total de factores en la industria eléctrica y electrónica. El caso de la industria maquiladora en México," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 251-287, July-Dece.
    5. Javier Andrés & José E. Boscá, 2000. "Technological differences and convergence in the OECD," Spanish Economic Review, Springer;Spanish Economic Association, vol. 2(1), pages 11-27.
    6. MG. Ladu, 2006. "Total Factor Productivity Estimates: Some Evidence from European Regions," Working Paper CRENoS 200606, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    7. Salvador Barrios & Eric Strobl, 2002. "Foreign direct investment and productivity spillovers: Evidence from the Spanish experience," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(3), pages 459-481, September.
    8. Ozlem Inanc & Marios Zachariadis, 2006. "International Price Dispersion and the Direction of Trade," University of Cyprus Working Papers in Economics 2-2006, University of Cyprus Department of Economics.
    9. MG. Ladu, 2005. "Total Factor Productivity Growth and Employment: A Simultaneous Equations Model Estimate," Working Paper CRENoS 200506, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    10. Yingfeng Xu, 2000. "A General Model of Comparative Advantage and the North-South Trade," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 25(2), pages 69-84, December.
    11. Dumont, Michel, 2004. "The Impact of International Trade with Newly Industrialised Countries on the Wages and Employment of Low-Skilled and High-Skilled Workers in the European Union," Thesis Commons bmxag, Center for Open Science.

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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