Productivity homogenisation trends of six advanced industrial economies: A vertically hyper-integrated approach

Structures and transformations: Heuristics of economic change

“…In fact, 'industry-specific direct labour productivities, while based on gross output in volume terms, reflect only partial views of the technique in use. For example, the productivity gap for a given industry across countries may have its origin on the productivity of the inputs supporting it, rather than on the activity itself' (Wirkierman, 2021, Section 1). The industry-based representation of the economy is contrasted with a representation by vertically hyper-integrated subsystems, such that gross outputs, inputs, and labour quantities are partitioned into relatively autonomous groups including both the quantities needed for the self-replacement of the economy and for the investment in the productive capacity needed for its expansion.…”

“…In this case, the representation in terms of vertically hyper-integrated subsystems allows measuring productivity differentials by taking full account of direct and indirect contributions from each industry to any other industry of the system. As a result, vertical hyper-integration 'may cast light on the "convergence hypothesis" from an alternative standpoint: system productivity measures summarise overall circularity in each single coefficient, so convergence in hyper-integrated productivity levels may provide a more accurate picture of sectoral gaps across countries' (Wirkierman, 2021, Section 1). The vertical hyper-integrated framework is used to assess the dynamics of productivity differentials for US, Germany, Japan, UK, France, and Italy by comparing the periods 1995-2007 and 2007-2015.…”