Labor productivity and technology heterogeneity

This paper investigates the role of technology club heterogeneity in economic growth and convergence. To do so, we break up labor productivity change into three factors - efficiency, technological, and capital-labor ratio changes - while distinguishing the impact of technology club heterogeneity respectively. This allows us to observe what is happening within and between clubs; as well as between the world and club technologies. Our labor productivity decomposition is nonparametric in nature and thus overcomes the issue of specifying functional forms for the club technologies. Our results reveal the existence of technology heterogeneity and divergence: the world technology is defined by advanced and rich countries; there exists intra-convergence phenomena (mostly due to capital-labor ratio change), but inter-convergences (owning to capital-labor ratio and technological changes) are not found. Finally, we argue that follower and marginalized countries have adopted imitating strategies, but with respect to different dimensions, namely technological change or capital-labor ratio.