Sectoral Energy- and Labour-Productivity Convergence

benefit from the experience and technologies developed by the countries operating at the
forefront.

However, in spite of the evidence of convergence, cross-country differences in
energy- and labour-productivity performance seem to be persistent. Our β-convergence
analysis has shown convergence to be conditional on cross-country differences in steady-state
characteristics, rather than to be unconditional with productivity levels converging to a
uniform steady state for all countries. This is in line with the results of our σ-convergence,
which indicated that cross-country differences in productivity levels remain to exist, even in
those sectors that display a convergence pattern. Moreover, we found that the speed of
energy-productivity convergence is in general higher than the speed of labour-productivity
convergence, in particular if we account for (unspecified) country-specific characteristics.
Nevertheless, at the same time cross-country differences in energy-productivity levels were
found to be still substantially larger than cross-country differences in labour-productivity
levels at all levels of sectoral aggregation.

In our search for the country- and sector-specific fundamentals determining these
(differences in) energy- and labour productivity developments, we found energy prices to
stimulate energy-productivity growth in the energy-intensive sectors while we did not find
much evidence of a positive relationship between wages and labour-productivity growth.
Moreover, our data show the cross-country differences in wages to be considerably larger
than cross-country differences in final energy prices (measured by the standard deviation of
the log of each variable). Hence, they are not likely to explain the persistent relatively high
cross-country differences in energy-productivity levels as compared to labour-productivity
levels. In addition, we found economies of scale to contribute to energy- and labour-
productivity growth in several sectors, while investment share, openness and specialization
play only a very limited role in explaining (cross-country) differences in energy- and labour-
productivity growth. Hence, there is a need for additional research to further explain sectoral
trends in energy- and labour-productivity growth across countries.

A possible explanation for the relatively high variation in energy-productivity levels
across countries might be that cross-country differences in environmental awareness
(influenced by social pressure) or stringency of environmental policies cause energy-
efficiency improvements to be a matter of urgency at different degrees in different countries.
Another reason might be a lack of international diffusion of energy-saving technologies as
compared to technologies enhancing labour productivity. This can be caused by the fact that,

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