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Introduction to Modern Economic Growth USA SWE BGD GBR CAN NLD DNK Capital productivity JPN NZL COL IRL GRC URY THA PAN PRT YUG CHE AUT ITA ISR HKG ESP PAK DEU FIN BEL NOR FRA TTO SGP IDN LKA Labor productivity Figure 3.5 Comparison of labor-productivity productivity differences across countries .8 and capital- where Rj is the rental rate of capital in country j and wj is the observed wage rate (which includes the compensation to human capital) in country j Equation (3.31), for example, states that if workers in a particular country have, on average, half the efficiency units as those in the United States, their earnings should be roughly half of American workers With data on factor prices, we can therefore construct an alternative series for Akj and Ahj ’s It turns out that the series for Akj and Ahj ’s implied by (3.29), (3.30) and (3.31) are very similar, so there appears to be some validity to this approach Given this validation, we can presume that there is some information in the numbers that Trefler obtains The following figure shows Trefler’s original estimates These numbers imply that there are very large differences in labor productivity, and some substantial, but much smaller differences in capital productivity For 145