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› Pieter Woltjer & Herman de Jong›University of Groningen› Faculty of Economics and Business

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

Reconciling sectoral benchmarks and time series

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)

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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?

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US productivity , 1935 (UK =100)Industry Rostas de Jong &

Woltjer(quantity) (unit value)

Food, Drink and Tobacco 207 152Textiles and Clothing 146 174Chemicals 213 263Metals 200 185Engineering 283 327Miscellaneous 260 247Total Manufacturing 215-218 224

Sources: Broadberry & Crafts (1992); Rostas (1948); de Jong & Woltjer (2010)

Benchmark comparisons

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Long-span sectoral projections

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Disentangling prod. growth (1)

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Disentangling prod. growth (2)

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)

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Transitivity in practice (1)

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Transitivity in practice (2)

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

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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

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