Estimation of Cross-Country Differences in Industry Production Functions

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Staff Reports

Estimation of Cross-Country Differences in Industry ProductionÂ Functions

January 1998 Number 36

JEL classification: F1, D24, O47

Author: James Harrigan

International trade economists typically assume that there are no cross-country differences in industry total factor productivity (TFP). In contrast, this paper finds large and persistent TFP differences across a group of industrialized countries in the 1980s. The paper calculates TFP indices, and statistically examines 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, and industry-level scale economies with identical technology in each country. The data support the constant returns/different technology hypothesis over the increasing returns/same technology hypothesis.

Available only in PDF PDF

48 pages / 197 kb

For a published version of this report, see James Harrigan, "Estimation of Cross-Country Differences in Industry Production Functions," Journal of International
Economics 47, no. 2 (April 1999): 267-93.

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