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Productivity convergence and economic growth: A frontier production function approach

  • Cornwell, Christopher Mark
  • Wächter, Jens-Uwe

The empirical growth literature has focused on capital accumulation but largely ignored productivity growth. To address this imbalance, we propose a methodology for analyzing productivity convergence based on frontier production functions. We examine whether departures from the frontier are cointegrated, determine the extent and speed of catch-up, and assess the importance of efficiency changes for economic growth. Using a sample of 26 OECD countries from 1965-90, we find convergence and catch-up is fairly strong among EU countries but not among the G-7. Overall, the ability to absorb new technology is an important source of economic growth.

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Paper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 06-1999.

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Date of creation: 1999
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Handle: RePEc:zbw:zeiwps:b061999
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  1. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
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  3. Slaughter, Matthew J, 1997. "Per Capita Income Convergence and the Role of International Trade," American Economic Review, American Economic Association, vol. 87(2), pages 194-99, May.
  4. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  5. Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
  6. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers 629, Yale - Economic Growth Center.
  7. Quah, Danny, 1993. " Galton's Fallacy and Tests of the Convergence Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 427-43, December.
  8. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
  9. Matthew J. Slaughter, 1997. "Per Capita Income Convergence and the Role of International Trade," NBER Working Papers 5897, National Bureau of Economic Research, Inc.
  10. Olson, Jerome A. & Schmidt, Peter & Waldman, Donald M., 1980. "A Monte Carlo study of estimators of stochastic frontier production functions," Journal of Econometrics, Elsevier, vol. 13(1), pages 67-82, May.
  11. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  12. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  13. Bernard, Andrew B & Jones, Charles I, 1996. "Productivity across Industries and Countries: Time Series Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 135-46, February.
  14. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  15. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  16. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
  17. 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.
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  19. repec:cup:cbooks:9780521453455 is not listed on IDEAS
  20. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
  21. Bernard, Andrew B & Jones, Charles I, 1996. "Technology and Convergence," Economic Journal, Royal Economic Society, vol. 106(437), pages 1037-44, July.
  22. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-38, December.
  23. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  24. Abramovitz, Moses, 1990. "The Catch-Up Factor in Postwar Economic Growth," Economic Inquiry, Western Economic Association International, vol. 28(1), pages 1-18, January.
  25. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
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