Sectoral Decomposition of Convergence in Labor Productivity: A Re-Examination from a New Dataset

Abstract

This paper investigates how the sector-specific source or the changing sectoral composition of labor productivity has contributed to β-convergence, using a newly constructed eight-sector database. The main findings are twofold. First, both within and sectoral reallocation have become important drivers of β-convergence in labor productivity. Second, agricultural productivity growth has been a significant contributor to β-convergence, whereas catch-up in other sectors has only contributed a small amount to convergence. The strong growth of the agriculture sector has been the most important driver of aggregate productivity convergence even though agricultural productivity itself in low-income countries is not converging to that in advanced economies.

Keywords: Labor productivity, Shift-share decomposition, β-decomposition, New sectoral database

JEL Classification: O1, O11, O4