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Modeling Technology and Technological Change in Manufacturing: How do Countries Differ?

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  • Francis Teal
  • Markus Eberhardt

Abstract

In this paper we ask how technological differences in manufacturing across countries can best be modeled when using a standard production function approach.� We show that it is important to allow for differences in technology as measured by differences in parameters.� Of similar importance are time-series properties of the data and the role of dynamic processes, which can be thought of as aspects of technological change.� Regarding the latter we identify both an element that is common across all countries and a part which is country-specific.� The estimator we develop, which we term the Augmented Mean Group estimator (AMG), is closely related to the Mean Group version of the Pesaran (2006) Common Correlated Effects estimator.� Once we allow for parameter heterogeneity and the underlying time-series properties of the data we are able to show that the parameter estimates from the production function are consistent with information on factor shares.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2008-12.

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Date of creation: 01 Apr 2008
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Handle: RePEc:oxf:wpaper:wps/2008-12

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Keywords: Manufacturing Production; Parameter Heterogeneity; Nonstationary Panel Econometrics;

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