Do Technology and Efficiency Differences determine Productivity?

Michael Koetter, J.W.B. Bos, Claire Economidou () and James Kolari ()

No 07-14, Working Papers from Utrecht School of Economics

Abstract: This paper investigates the forces driving output growth, namely technological, efficiency, and input changes, in 80 countries over the period 1970-2000. Relevant past studies typically assume that: (i) countries use resources efficiently, and (ii) the underlying production technology is the same for all countries. We address these issues by estimating a stochastic frontier model, which explicitly accounts for inefficiency, augmented with a latent class structure, which allows for production technologies to differ across groups of countries. Membership of these groups is estimated, rather than determined ex ante. Our results indicate the existence of three groups of countries. These groups differ significantly in terms of efficiency levels, technological change, and the development of capital and labor elasticities. However, a consistent finding across groups is that growth is driven mainly by factor accumulation (capital deepening).

Keywords: Total Factor Productivity; Latent Class; Stochastic Frontier; Efficiency; Growth (search for similar items in EconPapers)
JEL-codes: O47 O30 D24 G21 C24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff
Date: 2007-05

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