Convergence of Productivity: An Analysis of the Catch-up Hypothesis within a Panel of States

A consensus appears to have emerged in the literature that per capita income levels and/or levels of productivity in the industrialized market economies have converged significantly over the last century, and especially since the end of the second world war (see, e.g., Abramovitz, Baumol, Baumol and Wolff, De Long, Dollar and Wolff, Dowrick and Nguyen). The results of Abramovitz and Baumol, in particular, highlight these trends. They found an almost perfect inverse relation between labor productivity levels in 1870 and the rate of labor productivity growth between 1870 and 1979 among sixteen OECD countries. Abramovitz also investigated subperiods and found that labor productivity convergence was much slower in the period before World War II than after. Indeed, even in the postwar period, there is evidence from Abramovitz and from Baumol and Wolff that productivity convergence slowed during the 1970s, though this is disputed by Dowrick and Nguyen, who find parameter stability in their catch-up model between preand post-1973 periods when controlling for growth of factor intensities. Results of De Long show little evidence of productivity convergence over the last century when the sample is no longer restricted to OECD countries. However, Baumol and Wolff, using the Summers and Heston’s sample, which covers countries at all levels of development, find convergence in real GDP per capita among the top third or so of the countries over the 1950– 81 period, though it was weaker than among OECD countries alone. More recently, Dollar and Wolff find evidence of convergence of to-