Comparative Output and Labour Productivity in Manufacturing for China, Japan, Korea and the United States in Circa 1935 by a Production PPP Approach, by Kyoji Fukao, Harry X. Wu, Tangjun Yuan, Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-018. Dec 2008
Abstract
Following the standard methodology for measuring industry-of-origin or production-side PPPs, this study compares the unit values of manufacturing products in China, Japan, Korea and the US to calculate unit value ratios (UVRs) and hence estimates PPPs for individual manufacturing industries using the US as the base country in circa 1935. Based on the products that could be matched between these countries, the estimated manufacturing production PPPs for China, Japan and Korea are only from half to two thirds of the prevailing market exchange rates, suggesting much lower cost of production in manufacturing in these countries than in the US. The estimated PPPs are used to calculate industry-level output and labour productivity in China, Japan and Korea relative to those of the US in circa 1935. The results show that the size of factory manufacturing in Japan was 12 percent of the US level whereas in China it was only one percent and even lower in Korea. In terms of comparative labour productivity, measured as PPP$ per hour worked with the US as the reference, Japanese and Korean manufacturing was 24 and 23 percent of the US level, whereas Chinese manufacturing was only 7 percent of the US level.
Keywords
Production (industry-of-origin) purchasing power parity (PPP); unit value ratio; comparative output and labour productivity; comparative advantage; economic development;