Productivity differences across OECD countries, 1970–2000: the world technology frontier revisited

Growiec, Jakub (2008): Productivity differences across OECD countries, 1970–2000: the world technology frontier revisited.

Abstract

We re-estimate the World Technology Frontier (WTF) non-parametrically, using the Data Envelopment Analysis method, with a dataset covering both OECD country-level and US state-level data on GDP per worker and the stocks of physical capital, unskilled labor, and skilled labor. The WTF 2000 is found to be spanned by a few US states such as Colorado, Connecticut, Delaware, Nevada, Utah, and Washington, while the USA as a whole falls markedly behind these leader states. The auxilliary use of US state-level data adds extra precision to cross-country growth and levels accounting exercises. We also calculate the "appropriate technology vs. efficiency" decomposition, disentangling dynamic shifts of the WTF from movements along the WTF. Our results indicate that previous estimates of the WTF might have been downward biased and previous estimates of technical efficiency might have been upward biased.

• Item Type: MPRA Paper
• Language: English
• Keywords: world technology frontier, decomposition, country-level data, US state-level data, development accounting, growth accounting
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E23 - Production; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology

References

[1] Badunenko, O., D. J. Henderson, V. Zelenyuk (2007), “Technological Change and Transition: Relative Contributions to Worldwide Growth During the 1990’s”, DIW – Berlin, Discussion Paper 740.

[2] Barro, R.J., J.-W. Lee (2001), “International Data on Educational Attainment: Updates and Implications”, Oxford Economic Papers 53(3), 541-563.

[3] Basu, S., D.N.Weil (1998), “Appropriate Technology and Growth”, Quarterly Journal of Economics 113(4), 1025-1054.

[4] Bils, M., P.J. Klenow (2000), “Does Schooling Cause Growth?”, American Economic Review 90(5), 1160-1183.

[5] Caselli F. (2005), “Accounting for Cross-Country Income Differences” [In:] P. Aghion, S. Durlauf (eds.), Handbook of Economic Growth. Elsevier, Amsterdam.

[6] Caselli F., W. J. Coleman (2006), “The World Technology Frontier”, American Economic Review 96(3), 499-522.

[7] Cohen, D., M. Soto (2007), “Growth and Human Capital: Good Data, Good Results”, Journal of Economic Growth 12(1), 51-76.

[8] de la Fuente, A., R. Domenech (2006), “Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?”, Journal of the European Economic Association 4(1), 1-36.

[9] Faere, R., S. Grosskopf, M. Noriss, Z. Zhang (1994), “Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries”, American Economic Review 84(1), 66-83.

[10] Growiec, J. (2008), “A New Class of Production Functions and an Argument Against Purely Labor-Augmenting Technical Change”, International Journal of Economic Theory 4(4), forthcoming.

[11] Hall, R.E., C.I. Jones (1999), “Why Do Some Countries Produce So Much More Output Per Worker Than Others?”, Quarterly Journal of Economics 114(1), 83-116.

[12] Henderson, D. J., R. R. Russell (2005), “Human Capital and Convergence: A Production–Frontier Approach”, International Economic Review 46(4), 1167-1205.

[13] Heston, A., R. Summers, B. Aten (2006), “Penn World Table Version 6.2”, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania.

[14] Jerzmanowski, M. (2007), “Total Factor Productivity Differences: Appropriate Technology Vs. Efficiency”, European Economic Review 51, 2080-2110.

[15] Jones, C.I. (1997), “On the Evolution of the World Income Distribution”, Journal of Economic Perspectives 11, 19–36.

[16] Jones, C.I. (2005), “The Shape of Production Functions and the Direction of Technical Change”, Quarterly Journal of Economics 120(2), 517-549.

[17] Klenow, P.J., A. Rodriguez-Clare (1997), “The Neoclassical Revival in Growth Economics: Has It Gone Too Far?”, [in:] B.S. Bernanke, J.J. Rotemberg, eds., NBER Macroeconomics Annual 1997, pp. 73-103. MIT Press, Cambridge.

[18] Kumar, S., R. R. Russell (2002), “Technological Change, Technological Catchup, and Capital Deepening: Relative Contributions to Growth and Convergence”, American Economic Review 92(3), 527-548.

[19] Pandey, M. (2008), “Human Capital Aggregation and Relative Wages Across Countries”, Journal of Macroeconomics, forthcoming.

[20] Quah, D. T. (1996), “Empirics for Economic Growth and Convergence”, European Economic Review 40, 1353-1375.

[21] Quah, D. T. (1997), “Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs”, Journal of Economic Growth 2, 27-59.

[22] Sala-i-Martin, X.X. (2006), “The World Distribution of Income: Falling Poverty and ... Convergence, Period”, Quarterly Journal of Economics 121(2), 351-397.

[23] Simar, L., P.Wilson (2000), “Statistical Inference in Nonparametric Frontier Models: State of the Art”, Journal of Productivity Analysis 13, 49-78.

[24] Timmer, M.P., G. Ypma, B. van Ark (2003), “IT in the European Union: Driving Productivity Divergence?”, Groningen Growth and Development Centre Research Memorandum.

[25] Turner, C., R. Tamura, S.E. Mulholland (2008), “How Important are Human Capital, Physical Capital and Total Factor Productivity for Determining State Economic Growth in the United States: 1840 – 2000?”, Nicholls State University, unpublished.