social distancing measures. EMDEs may be less well able to conduct remote learning, while large negative income shocks have also been found to increase school dropout rates in EMDEs (World Bank, 2020b). Finally, progress in improving institutional quality has stagnated in many EMDEs: measures of government effectiveness (Worldwide Governance Indicators) have not improved on average since the 1990s.

# **6 Conclusions and policy implications**

This chapter is the first comprehensive study of long-term labor productivity convergence trends to take account of the EMDE productivity growth surge since 2000. It implements a range of methodologies, including newer techniques for estimating club convergence with a sample that reaches into the post-crisis period. In doing so, it highlights a shift in the pace of productivity convergence since 2000 among a subset of EMDEs. Specifically, the chapter documents the following findings:

**Main findings.** On average since 2010, labor productivity in EMDEs was just 16 percent of the advanced economy average and, in LICs, it was just 2 percent. While there was only limited evidence of broad-based productivity convergence until 2000, subsequently on average, EMDE economies are now closing the gap with advanced economies following a broad-based surge in EMDE productivity growth. However, the pickup in productivity growth in EMDEs is unlikely to reduce productivity disparities materially for EMDEs on average—productivity gaps were declining by just 0.5 percent annually in the post-crisis period, and the pace has recently begun to decline. Even at the peak rate of convergence, for the average EMDE, to reduce the productivity gap with advanced economies by half would take nearly 140 years.

The results in this chapter suggest that weak or non-existent average rates of convergence to the productivity frontier in EMDEs in part reflects the presence of multiple attraction points for different groups of EMDEs. Over the past five decades, multiple methodologies find that countries have fallen into distinct convergence clubs in which productivity moved towards a similar long-term productivity level. In contrast to previous studies, problems associated with PPP-adjusted output levels are avoided, using market-exchange rate adjusted productivity levels as an alternative.

Many EMDEs have separated from lower-productivity EMDE clubs and moved into higher-level productivity clubs since 2000. These countries have been characterized by systematically better initial education levels, greater political stability and governance, and greater or deepening economic complexity, producing in sectors beyond their immediate comparative advantage. EMDEs in lower productivity clubs have made little progress in catching up to advanced economy productivity levels over the past 50 years.

**Policy implications** . These findings highlight the critical importance of policies and institutions that are conducive to productivity growth. EMDEs that have made significant progress in rising to higher convergence trajectories have often had a strong foundation of high education levels with which to enhance production efficiency and incorporate new technologies. However, educational reforms should focus on learning outcomes rather than simply years of attainment (World Bank, 2018d). A highly educated and well-trained workforce will be better placed to adopt new technologies and attract FDI, which is also associated with faster rates of productivity convergence. Commitment to effective governance, including through the reduction of corruption and political

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