Global convergence in labour productivity: new evidence from a Multi-Regional Input-Output analysis

This study provides novel insights to the ongoing debate on productivity convergence, adopting a Multi-Regional Input-Output approach covering the period 2000–2014 across 43 countries. Contrary to most of the literature based on neoclassical measures of productivity, we estimate the evolution of physical productivity of vertically integrated sectors (or subsystems) building on the work of Pasinetti. The analysis detects beta convergence for the full sample and a faster rate of productivity growth for those subsystems lagging at the beginning of the period. However, convergence slows after the Global Financial Crisis and it is not homogeneous between group of countries. Our findings have relevant policy implications, indicating that major productivity gains are recorded in the production subsystems and the development of manufacturing activities is thus crucial to speed up aggregate productivity growth, restoring momentum to the convergence process at the global level. Adequate industrial policies play a key role in shaping the dynamics of productivity growth in different countries, thus defining the fate of the convergence process in the years to come.