New Evidence on Sectoral Labor Productivity: Implications for Industrialization and Development

Relatively little is known about productivity differences between rich and poor countries at the sectoral level. We leverage recent data releases by the Groningen Growth and Development Centre to build a new dataset of comparable labor productivity levels in agriculture and manufacturing for 64 mostly poor countries during 1990-2018. We find two key results: (i) cross-country productivity gaps are larger in manufacturing than in the aggregate and (ii) there is no tendency for manufacturing productivity to converge. Our results challenge the notion that expanding manufacturing employment in low-income countries is essential for closing aggregate productivity gaps. While our data do not indicate a special role for manufacturing employment in the development process, we do find a strong correlation between productivity growth in manufacturing and aggregate productivity growth. Joint work with Berthold Herrendorf and Richard Rogerson.