The rise of services and convergence in labor productivity among countries

ABSTRACT

Studies of economic convergence among countries usually focus on per capita GDP or on a particular sector, such as labor productivity in the manufacturing sector. Using value-added data from the United Nations Statistics Division’s National Accounts and employment data from the International Labour Organization (ILO), we compile labor productivity data for 160 countries for the period 1991–2016 in order to examine labor productivity convergence for broad sectors and for the aggregate economy. The results demonstrate the emergence of convergence in labor productivity among countries. The rate of convergence increases significantly when we consider only 141 countries, excluding the low-income countries. The sectoral convergence test reveals that the service sector is the leading force behind the recently observed catching-up in labor productivity among countries, followed by manufacturing. Reallocation of labor across sectors seems to have increased aggregate productivity in developing countries while reducing it in developed countries.

KEYWORDS:

• Unconditional convergence
• labor productivity
• agriculture
• manufacturing and service industries

JEL CLASSIFICATION:

• O13
• O14
• O40
• O47

Disclosure statement

No potential conflict of interest was reported by the author.