Description - Competitiveness, Convergence, and International Specialization by David Dollar
David Dollar and Edward Wolff look at claims that a de-industrialized United States is on the road to second-rate status in the global market-place and find them to be both unfounded and simplistic. Their systematic and empirical investigation of the mechanisms through which countries like Japan and Germany have caught up with the United States in terms of productivity and standard of living will inform public debate about which government policies are likely to improve a nation's competitiveness. Looking at productivity convergence from the industry and sub-industry level, Dollar and Wolff also examine questions of the relationship of productivity growth in individual industries to convergence of overall productivity in developed countries, the identification of industries crucial for aggregate productivity growth, the sources of productivity growth within industries, the relationship between international trade and productivity convergence, and whether the same mechanics of convergence are at work in developing countries.
The authors' findings reveal, among other things, that the slowness of US productivity growth relative to other nations is largely due to forces pushing for convergence of aggregate productivity levels. Although, other countries have been catching up with the US there is no evidence that they will surpass the US or that the US has de-industrialized. Perhaps most importantly, Dollar and Wolff find that countries catch up by raising their productivity levels in all manufacturing industries, not by large shifts of their employment and output from low- to high-value-added sectors. The growing similarity of advanced economies in terms of overall productivity masks a continued high degree of specialization in particular industries. Today different countries are the productivity leaders in different industries. Accordingly, the authors recommend that public policy focus on institutions and policies to promote innovation in general, rather than in key industries, and on free trade rather than protectionism.
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