1. INTRODUCTION
Economies differ, and so does productivity performance. Of course, economies also interact
and, hence, productivity developments are thought to be determined not only by
developments within a particular country or sector, but also by what is happening in the
outside world. Therefore, a key issue in understanding long-run productivity performance is
whether the process of economic growth tends to involve reductions in productivity
differences among countries, for example, due to capital accumulation or technology
transfers. The introduction of new or endogenous growth theories has generated renewed
interest in this question and has induced a wave of empirical research on cross-country
convergence of per capita income as well as of labour productivity or total factor productivity
(e.g., Barro and Sala-i-Martin 1992, Mankiw et al. 1992, Islam 1995). This issue obviously
bears important implications for the international welfare distribution. At the same time, over
the last decades increasing attention is paid to the role of energy in production processes and
economic growth. Energy consumption is an important source of greenhouse gas emissions.
Most governments in OECD countries explicitly recognize the need for sustainable
development and aim at a decoupling of economic growth and environmental pressure. In a
more operational sense this implies that not only labour productivity, but also energy
productivity have to increase. Consequently, important questions arise concerning the
dynamics of cross-country differences of energy- and labour productivity. Are these
differences decreasing, or is the gap between leading and backward countries getting larger?
Does energy-productivity convergence follow patterns of labour-productivity convergence?
Do relatively inefficient countries catch-up with technological ‘leaders’? And if so, how
quickly and by what means? Do convergence patterns differ substantially across sectors? We
will answer these questions by simultaneously carrying out an empirical analysis of cross-
country energy- and labour-productivity convergence at a detailed sector level, using a new
dataset that merges energy data and economic data for 13 sectors and 14 OECD countries,
covering the period 1970-1997.
In several respects, our paper differs from previous empirical research on cross-
country convergence. By including energy-productivity developments, our analysis differs
from the empirical macroeconomic convergence literature that focuses on convergence of per
capita income, labour productivity and total factor productivity. Moreover, in spite of many
existing cross-country studies on energy-productivity or energy-intensity developments and
its determinants (e.g., Howarth et al., 1991; Miketa, 2001; Schipper and Meyers, 1992;