Abstract This paper analyses econometrically the relationship between productivity growth in manufacturing and technology transfer from the leading economy. The recent convergence literature identifies two processes required for convergence; nations must both attain comparable levels of factor intensity and similar levels of technology. Homogeneity in technologies has neither theoretical nor empirical support. The paper focuses on the manufacturing sector and its two-digit industries while allowing for heterogeneity in technology and in the rate of catch-up. It compares catch-up rates and productivity estimates across manufacturing sectors and GDP and discusses possible sources for the obtained differences. The empirical part of the paper explores the validity of our econometric model for 16 OECD countries for aggregate and manufacturing labor productivity. Our results indicate that aggregate studies bias downward the estimated convergence rates. The rates of catch-up, as well as levels of productivity and sources of its growth in terms of technology and efficiency growth, also differ across countries. Finally, it finds that institutional factors such as bureaucratic efficiency are important determinants of catch-up rates
