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Estimation of total factor productivity for regions and sectors in Italy. A panel cointegration approach

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Author Info
Emanuela Marrocu ()
Raffaele Paci ()
R. Pala

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Abstract

In this paper a complete set of estimates of long-run production functions for 20 regions and 17 sectors in Italy is provided over the period 1970-1994. Our approach features two important aspects. First, this paper represents the first attempt to provide such a comprehensive set of estimates for the Italian economy. Moreover, we allow the estimated production functions for heterogeneity across sectors and regions. This is particularly appropriate when analysing the Italian economy since the Italian regions have been experiencing fairly different and, in certain cases, divergent development paths. Secondly, on the basis of specific panel tests, we show that there is a considerable empirical evidence which suggests the presence of unit roots in our series; therefore, we apply panel cointegration tests to guard against the spurious regression problem and to detect long-run relationships. Evidence of long run relationships is found for most of the regions and the sectors on the basis of the cointegration tests; thus, the problem of spurious regressions is ruled out allowing us to offer rigorous inference on the estimation of regional production functions. We find that factor elasticities highly differ across regions and sectors. This is an important result since most previous studies by employing unique national elasticities introduce a serious bias in the productivity comparisons.

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Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200016.

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Date of creation: 2000
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Handle: RePEc:cns:cnscwp:200016

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Related research
Keywords: total factor productivity; regional gap; panel unit root test; panel cointegration test; Italy.;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Raffaele Paci & Stefano Usai, 1999. "The role of specialisation and diversity externalities in the agglomeration of innovative activities," Working Paper CRENoS 199915, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
    Other versions:
  2. Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 207-22, April. [Downloadable!] (restricted)
  3. Islam, Nazrul, 1999. "International Comparison of Total Factor Productivity: A Review," Review of Income and Wealth, Blackwell Publishing, vol. 45(4), pages 493-518, December.
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    Other versions:
  6. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July. [Downloadable!] (restricted)
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  7. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
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  9. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I. [Downloadable!] (restricted)
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  11. Culver, Sarah E & Papell, David H, 1997. "Is There a Unit Root in the Inflation Rate? Evidence from Sequential Break and Panel Data Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 435-44, July-Aug.. [Downloadable!]
  12. Garcia-Mila, Teresa & McGuire, Therese J & Porter, Robert H, 1996. "The Effect of Public Capital in State-Level Production Functions Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 177-80, February. [Downloadable!] (restricted)
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  13. Harrigan, James, 1999. "Estimation of cross-country differences in industry production functions," Journal of International Economics, Elsevier, vol. 47(2), pages 267-293, April. [Downloadable!] (restricted)
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  14. Kevin Lee & M. Hashem Pesaran & Ron Smith, 1998. "Growth Empirics: A Panel Data Approach- A Comment," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 319-323, February. [Downloadable!] (restricted)
  15. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
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  16. Federico Bonaglia & Eliana La Ferrara & Massimiliano Marcellino, 2000. "Public Capital and Economic Performance: Evidence from Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 59(2), pages 221-244, September.
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  17. Wu, Yangru, 1996. "Are Real Exchange Rates Nonstationary? Evidence from a Panel-Data Test," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 54-63, February. [Downloadable!] (restricted)
  18. Eliana La Ferrara & Massimiliano Marcellino, . "TFP, Costs, and Public Infrastructure: An Equivocal Relationship," Working Papers 176, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
  19. Hall, Robert E & Jones, Charles I, 1997. "Levels of Economic Activity across Countries," American Economic Review, American Economic Association, vol. 87(2), pages 173-77, May. [Downloadable!] (restricted)
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  20. MacDonald, Ronald, 1996. "Panel unit root tests and real exchange rates," Economics Letters, Elsevier, vol. 50(1), pages 7-11, January. [Downloadable!] (restricted)
  21. Lee, Kevin & Pesaran, M Hashem & Smith, Ron, 1997. "Growth and Convergence in Multi-country Empirical Stochastic Solow Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 357-92, July-Aug.. [Downloadable!]
  22. Karlsson, Sune & Lothgren, Mickael, 2000. "On the power and interpretation of panel unit root tests," Economics Letters, Elsevier, vol. 66(3), pages 249-255, March. [Downloadable!] (restricted)
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  23. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November. [Downloadable!] (restricted)
  24. Andrew Levin & Chien-Fu Lin, 1992. "Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties," University of California at San Diego, Economics Working Paper Series 92-23, Department of Economics, UC San Diego. [Downloadable!]
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  25. Quah, Danny, 1994. "Exploiting cross-section variation for unit root inference in dynamic data," Economics Letters, Elsevier, vol. 44(1-2), pages 9-19. [Downloadable!] (restricted)
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  26. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    Other versions:
  27. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Scoppa, Vincenzo, 2007. "Quality of Human and Physical Capital and Technological Gaps across Italian Regions," MPRA Paper 15740, University Library of Munich, Germany. [Downloadable!]
  2. Adriana Di Liberto & Roberto Mura & Francesco Pigliaru, 2003. "A panel technique for the analysis of technology convergence: The case of the Italian regions," ERSA conference papers ersa03p293, European Regional Science Association. [Downloadable!]
  3. Roberto Basile & Mauro Costantini & Sergio Destefanis, 2005. "Unit root and cointegration tests for cross-sectionally correlated panels. Estimating regional production functions," ISAE Working Papers 53, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
    Other versions:
  4. Ana María Iregui B. & Luis Fernando Melo V. & María Teresa Ramírez G., . "Productividad Regional y Sectorial en Colombia: Análisis utilizando datos de panel," Borradores de Economia 378, Banco de la Republica de Colombia. [Downloadable!]
    Other versions:
  5. Andrea Bonaccorsi & Lucia Piscitello & Cristina Rossi, 2005. "Explaining The Territorial Adoption Of New Technologies - A Spatial Econometric Approach," ERSA conference papers ersa05p92, European Regional Science Association. [Downloadable!]
  6. Raffaello Bronzini & Paolo Piselli, 2006. "Determinants of long-run regional productivity: the role of R&D, human capital and public infrastructure," Temi di discussione (Economic working papers) 597, Bank of Italy, Economic Research Department. [Downloadable!]
  7. Sergio Destefanis & Vania Sena, 2005. "Public capital and total factor productivity: New evidence from the Italian regions, 1970--98," Regional Studies, Taylor and Francis Journals, vol. 39(5), pages 603-617, July. [Downloadable!] (restricted)
  8. Maria Gabriela Ladu, 2006. "Total Factor Productivity Estimates: Some Evidence from European Regions," Working Paper CRENoS 200606, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  9. Raffaele Paci & S. Saddi, 2002. "Capitale pubblico e produttività nelle regioni italiane," Working Paper CRENoS 200201, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  10. Luis F. Melo & John J. León & Dagoberto Saboyá, . "Cointegration Vector Estimation By Dols For A Three-Dimensional Panel," Borradores de Economia 474, Banco de la Republica de Colombia. [Downloadable!]
    Other versions:
  11. Torfinn Harding and Jørn Rattsø, 2005. "The barrier model of productivity growth: South Africa," Discussion Papers 425, Research Department of Statistics Norway. [Downloadable!]
    Other versions:
  12. Adriana Di Liberto & Francesco Pigliaru & Roberto Mura, 2008. "How to measure the unobservable: a panel technique for the analysis of TFP convergence," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 343-368, April. [Downloadable!] (restricted)
    Other versions:
  13. Robin Naylor, 2001. "Firm profits and the number of firms under unionised oligopoly," Working Paper CRENoS 200109, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  14. Emanuela Marrocu & Raffaele Paci, 2006. "The effects of public capital on the productivity of the Italian regions," Working Paper CRENoS 200613, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  15. Emanuela Marrocu & Raffaele Paci & Francesco Pigliaru, 2006. "Gli effetti del capitale pubblico sulla produttività delle regioni italiane," Working Paper CRENoS 200601, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  16. Robin Naylor, 2001. "Industry profits and market size under bilateral oligopoly," Working Paper CRENoS 200108, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
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