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The Magnitude of the Task Ahead: Macro Implications of Heterogeneous Technology

Markus Eberhardt () and Francis Teal

No 2017-16, Discussion Papers from University of Nottingham, GEP

Abstract: The empirical growth literature is dominated by accounting and regression methods which assume common production technology across countries. Our empirical model relaxes this assumption and further allows unobservable determinants of output (Total Factor Productivity, TFP) to differ across countries and time, while accounting for endogeneity and cross-section correlation arising from global shocks. Using manufacturing sector data for 48 economies we show that the assumption of common technology creates questionable results in accounting exercises and is rejected in our regressions. We illustrate that the erroneous choice of homogeneous technology has substantial impact on patterns and magnitudes of resulting TFP estimates.

Keywords: Cross-Country Analysis; Heterogeneous Technology; Total Factor Productivity; Common Factor Model (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff and nep-gro
Date: 2017
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