International Comparison of Total Factor Productivity: A Review

Several different approaches to international comparison of Total Factor Productivity (TFP) have now emerged. Among these are the time-series approach, the panel approach, and the cross-section approach. This paper compares methodologies of these different approaches and results that have been obtained from their application. The comparison of results is conducted in the context of two samples, namely the G7 countries and a large sample that includes developing nations. It is found that while there are broad agreements in results, there exist considerable differences too. The analysis shows how these differences can be related, in part, to differences in methodology. The paper also shows how these different approaches to international TFPcomparison can play complementary role in enhancing our understanding of such important phenomena as technological diffusion and TFP-convergence. (JEL O47) ---------------------------------------------------------------------------------I would like to thank Chad Jones, Charles Hulten, Ishaq Nadiri, Boyan Jovanovic, Susanto Basu, and other participants of NBER seminars in which earlier versions of this paper were presented. The paper further benefited from comments by two anonymous referees of this journal. Finally, I would like to thank Dale Jorgenson for his encouragement to my work on this paper. All remaining shortcomings and errors are mine.