Decomposing productivity growth and divergence: an index number approach.

We propose a cross-country productivity growth decomposition that allows us to quantify the industry-level contributors to an aggregate productivity growth differential. We deploy this cross-country decomposition to quantify—for the first time—the disaggregate contributors to the divergence in market sector productivity growth between Australia and New Zealand. The results suggest that large contributions to the divergence arise from differences in labour growth across the two countries and that cross-country structural differences are large, and generally act to reduce the divergence. Most of the industries are found to add to the divergence, with particularly large contributions coming from differences across the mining and wholesale trade industries. [ABSTRACT FROM AUTHOR]