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Evaluating Economic Theories of Growth and Inequality: A Study of the Danish Economy

  • Arnab Bhattacharjee
  • Eduardo de Castro
  • (Late) Chris Jensen-Butler

We present a model for studying regional and sectoral variation in total factor productivity (TFP) and develop an empirical test, based on the skewness of TFP distribution, to empirically distinguish between different growth theories. While negative skewness is consistent with the neo-Schumpeterian idea of catching up with leaders, zero skewness supports the neoclassical view that deviations from the frontier reflect only idiosyncratic productivity shocks. We argue that positive skewness corresponds to a model where the combination of exogenous technology with non-transferable knowledge accumulated in specific sectors and regions explains TFP. This argument provides the framework for an empirical model based on stochastic frontier analysis. The model is used to analyse regional and sectoral inequalities in productive efficiency across Danish sectors and regions.

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Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 200723.

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Date of creation: 15 Nov 2007
Date of revision:
Handle: RePEc:san:cdmawp:0723
Contact details of provider: Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
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  1. Chris Jensen-Butler & Bjarne Madsen, 2005. "Decomposition analysis: an extended theoretical foundation and its application to the study of regional income growth in Denmark," Environment and Planning A, Pion Ltd, London, vol. 37(12), pages 2189-2208, December.
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  12. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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  16. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
  17. Carree, Martin A., 2002. "Technological inefficiency and the skewness of the error component in stochastic frontier analysis," Economics Letters, Elsevier, vol. 77(1), pages 101-107, September.
  18. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
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  26. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
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