A General Blueprint for International Productivity Comparison

The measurement of interspatial productivity differences (for example between countries), also called the comparison of productivity levels, is usually based on models that make use of strong assumptions such as competitive behaviour and constant returns to scale. This paper develops a blueprint for interspatial comparative productivity measurement. It will be shown that all the usual, neoclassical assumptions can be avoided. The key concept is a production unit’s profitability. In the KLEMSY framework this is defined as (output) revenue divided by (input) cost. Given detailed prices and quantities, revenue as well as cost is computed as sum of prices times quantities. For the input cost of ∗ The views expressed in this paper are those of the author and do not necessarily reflect any policy of Statistics Netherlands. Previous versions of this paper have been presented at a conference on International Comparisons of Prices, Income and Productivity, Oxford, 8-9 April 2010, and at a conference on Productivity and Internationalization, The Hague, 2-3 September 2010.