Output and productivity measurement in a US/UK comparison, 1900-1950

1. Output and productivity measurement in a US/UK comparison, 1900-1950 Reconciling sectoral benchmarks and time series • Pieter Woltjer & Herman de Jong • University of Groningen • Faculty of Economics and Business

2. Introduction • Long-span projections criticized through confrontations with benchmarks (Ward & Devereux, 2003) • Sectoral, industry-of-origin, studies suffer from the same problems (Broadberry & Burhop, 2007) • For pre-war period some benchmarks are available to cross-check time series projections • Mostly based on quantity approach (Rostas, 1948) • Data is available to apply ICOP unit value approach (Maddison & van Ark, 1988) • Recent studies stress advantages of ICOP approach over quantity based comparisons (Fremdling et al., 2007)

3. Outline • Examine available benchmark/time series evidence for first half 20th century for the US and the UK • Discuss differences benchmarking methods, quantity vs. unit value approach • Analyze comparative productivity 1900-1957 using time series and shift-share • Compare benchmark and time series, is reconciliation feasible?

4. Benchmark comparisons

5. Long-span sectoral projections

6. Disentangling prod. growth (1)

7. Disentangling prod. growth (2)

8. Reconciliation time series and benchmarks • Are the results from benchmarks and time series consistent, or transitive? • Transitivity across time and space not realistic or reasonable to impose on international comparison (Dalgaard & Sorensen, 2002) • Intransitivity error will increase if individual price movements are large (length of period) and if sectoral structure of countries under comparison differs (Szilagyi, 1984) • Sharp changes in price level compared to the base country tend to worsen intransitivity error (Aten & Heston, 2002) • Early 20th century could expect large deviations (wars, inflation)

9. Transitivity in practice (1)

10. Transitivity in practice (2)

11. Reconciling time series and benchmarks • Discrepancies of projections will depend largely on the accuracy of underlying benchmarks and time series • Benchmarks are affected by measurement errors (e.g. quality of products) and representativeness issues (e.g. selection bias) • ICOP approach represents substantial improvement over older quantity based international comparisons • Time series suffer from measurement errors (e.g. technological development) and international inconsistencies (differences in national accounting) • New historical national accounts rely on more systematic methodology, aids international comparisons

12. Conclusions • For the moment discrepancy between both methods remains • We argue that there is a clear need for more (ICOP) benchmark studies for early 20th century • In addition, future research should put more emphasis on the link between benchmarks and long-span projections • Intransitivity and measurement errors can be quantified by analyzing shifts in international and inter-temporal weights • Historical national accounts should be revisited, and supplemented by new, basic, unchained time series based on price data from direct benchmark comparisons • Historical national accounts stress the comparability of methodologies and coverage over time as well as between countries