Cross Country Comparisons of Industry Total Factor

International trade economists typically assume that TFP for each industry is the same in every country. This paper casts doubt on this hypothesis, finding large and persistent TFP differences across countries. The paper considers measurement issues in depth, and a methodology for international TFP comparisons is described. This methodology is applied to a dataset on prices, inputs, and outputs for a group of industrialized countries in the 1980s. The paper finds that the United States was the TFP leader in machinery and equipment during the 1980s, with Japan slightly behind. These results are compared to the previous literature on disaggregated TFP comparisons. Two standard assumptions in neoclassical trade theory are that technological knowledge is the same in all countries, and that production processes exhibit constant returns to scale. An implication of these assumptions is that total factor productivity (TFP) for each industry is the same in every country: given quantities of inputs will produce equal amounts of output.