Solow residual correlations across countries and industries

Costello(1993)JPE
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I find that aggregate output growth is correlated across countries, but aggregate productivity growth is only weakly correlated across countries. At the industry level, productivity growth is significantly correlated across industries within a country but is less correlated across countries for any individual industry. In the error-components framework, the estimated nation effects are as important as, and sometimes more important than, industry effects.

The evidence suggests that short-run productivity growth is more similar across industries in one nation than across countries for a particular industry. The results are consistent with the presence of labor hoarding if labor hoarding is truly a national occurrence. The results are also consistent with observing nation-specific technology shocks to the extent that they represent excluded factors such as human capital or the infrastructure in a country.
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