Output and productivity measurement in a US/UK comparison, 1900-1950 11-06-10 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

11-06-10 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)

11-06-10 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?

Benchmark comparisons 11-06-10 US productivity , 1935 (UK =100) Industry Rostas de Jong & Woltjer (quantity) (unit value) Food, Drink and Tobacco 207 152 Textiles and Clothing 146 174 Chemicals 213 263 Metals 200 185 Engineering 283 327 Miscellaneous 260 247 Total Manufacturing 215-218 224 Sources: Broadberry & Crafts (1992); Rostas (1948); de Jong & Woltjer (2010)

Long-span sectoral projections 11-06-10

Disentangling prod. growth (1) 11-06-10

Disentangling prod. growth (2) 11-06-10

Reconciliation time series and benchmarks 11-06-10 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)

Transitivity in practice (1) 11-06-10

Transitivity in practice (2) 11-06-10

Reconciling time series and benchmarks 11-06-10 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

Conclusions For the moment discrepancy between both methods remains 11-06-10 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