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A nonparametric approach to the decomposition of labor productivity in regional manufacturing


  • Juan Carlos Chávez
  • Luis Fernando López Ornelas


This study decomposes both the labor productivity gap and the labor productivity growth into the contributions of technical efficiency, capital deepening and technological change for Mexican manufacturing at the regional level. In order to do so, we apply a methodology that combines two literatures: the nonparametric construction of production frontiers and the general decomposition approach developed by Shorrocks (2012) which is based on the Shapley value. The results indicate that regional differences in labor productivity are mainly attributed to technical efficiency, and, to a lesser extent, to regional differences in capital deepening. Moreover, labor productivity growth was not homogeneous across regions over the period 1998-2008. In both the north and the south, the increase in labor productivity was mainly driven by technical efficiency, while technological change was the most influential factor on labor productivity growth in the central regions.

Suggested Citation

  • Juan Carlos Chávez & Luis Fernando López Ornelas, 2013. "A nonparametric approach to the decomposition of labor productivity in regional manufacturing," Working Papers 2013-08, Banco de México.
  • Handle: RePEc:bdm:wpaper:2013-08

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    Capital intensity; Labor productivity; Technical efficiency; Technological change; Manufacturing; Shapley value;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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