TFP in the Manufacturing Sector: Long-Term Dynamics, Country and Regional Comparative Analysis

Abstract

We employ a recent empirical strategy to estimate country-specific and time-varying total factor productivity (TFP) levels for the manufacturing sector of 63 countries over 40 years. The methodology is based on estimated country-specific production functions while accounting for cross-section dependence and nonstationary series. We then analyze the derived TFP series across the entire sample and several regional groupings (Asia, Europe and Central Asia (ECA), Middle East and North Africa (MENA), Latin America and the Caribbean (LAC), and the USA). Our analysis reveals the following. Firstly, the TFP that is common across countries has an upward trend with a significant slump in 2008. Secondly, the leading positions in terms of productivity in the manufacturing sector remained the prerogative of major developed countries. Thirdly, several countries succeeded in climbing the ladder through outstanding productivity growth. Fourthly, despite a clear hierarchy in terms of manufacturing productivity across regional blocs, all regions witnessed an increase in productivity over the period. Fifthly, there is evidence of convergence in the TFP across countries and within Asia and ECA before a potential break in 2008.