What Do We Really Know about Productivity Differentials across Countries?

Abstract

This article examines and critiques the most widely used measure of productivity (output per worker employed) and argues that this is a flawed, inadequate, and even misleading measure of economic progress. In terms of cross-country comparisons and assessing trends over time, both the numerator (GDP or value added) and the denominator (number of workers or hours worked) have significant conceptual and measurement problems. These issues are considered both in general and regarding how they affect analyses of productivity differentials in the United States and India in the recent period. JEL Classification: B5, O47, E24.