The Wedge and Productivity Convergence Across The G-7 Countries

Abstract

This paper aspires to ascertain the forces underlying sigma productivity convergence by establishing a link between the wedge and productivity, and the wedge and convergence in productivity among the G-7 countries during 1970-1993. The study finds consistent evidence of the dispersion in the wedge as a driving force behind the sigma productivity convergence. Utilizing a time series framework, the paper finds that a one percent increase in the variation in the wedge increases the variation in per capita productivity by 0.32 percent in the short-run and 1.88 percent in the long-run. (047, Rl 1)