Energy-Productivity Convergence Across Developed and Developing Countries in 10 Manufacturing Sectors

Abstract

This paper provides an empirical analysis of energy-productivity convergence across 56 developed and developing countries, in 10 manufacturing sectors, for the period 1971 to 1995. We find that, except for the non-ferrous metals sector, cross-country differences in absolute energy-productivity levels tend to decline, particularly in the less energy-intensive industries. Testing for the catch-up hypothesis using panel data confirms that in all manufacturing sectors energy-productivity growth is, in general, relatively high in countries that initially lag behind in terms of energy-productivity performance seem to be persistent; convergence is found to be country-specific rather than global, with countries converging to different steady states and several failing to catch up. Finally, we find that country-specific factors, such as energy price and investment ratio, do explain the observed cross-country differences in energy-productivity performance, but only to a very limited extent. Hence, further research is needed to identify what accounts for the observed persistence in cross-country energy-productivity differentials