Sectoral Energy- and Labour-Productivity Convergence

Sectoral Energy- and Labour-Productivity Convergence

Peter Mulder^a and Henri L.F. de Groot^b1

International Institute for Applied Systems Analysis, A-2361 Laxenburg, Austria

^b Dept. of Spatial Economics, Vrije Universiteit and Tinbergen Institute
De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands

Abstract

This paper provides an empirical analysis of energy- and labour-productivity convergence at
a detailed sectoral level for 14 OECD countries, covering the period 1970-1997. A σ-
convergence analysis shows that the development of cross-country variation in productivity
performance depends on the level of aggregation. Both patterns of convergence as well as
divergence are found. A β-convergence analysis provides support for the hypothesis that in
most sectors lagging countries tend to catch up with technological leaders, in particular in
terms of energy productivity. Moreover, the results show that convergence is conditional
rather than unconditional, meaning that productivity levels converge to country-specific
steady states, and that cross-country differences of energy-productivity levels are
substantially larger than of labour-productivity levels at all levels of sectoral aggregation.
Finally, searching for the fundamentals determining cross-country productivity differentials
reveals a positive productivity effect of energy prices and economies of scale in several
sectors, while wages, investment share, openness and specialization play only a very limited
role in explaining (cross-country differences in) energy- and labour-productivity growth.

Keywords: energy productivity, labour productivity, convergence, sectoral analysis
JEL codes: O13, O47, O5, Q43

¹ Corresponding author: Henri L.F. de Groot, Dept. of Spatial Economics, Vrije Universiteit, De Boelelaan
1105, 1081 HV Amsterdam, the Netherlands, email [email protected], tel. +31 20 444 6168, fax. +31 20 444
6004. We gratefully acknowledge useful comments by Jeroen van den Bergh, Kornelis Blok, Reyer Gerlagh,
Ton Manders, Hein Mannaerts, Machiel Mulder, Sjak Smulders, Paul Tang and Herman Vollebergh on earlier
versions of this paper. Financial support of NWO as well as the hospitality of CPB Netherlands Bureau for
Economic Policy Analysis is gratefully acknowledged.

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