R&D, Technological Progress and Efficiency Change in Industrial Activities

The objective of this paper is to estimate total factor productivity growth (TFP) in an international and sectoral setting using two alternative approaches based on the estimation of parametric stochastic frontiers and non-parametric production frontiers (DEA). The TFP is decomposed into two components, technological progress and efficiency change, that can also be interpreted as the results of the innovation and catching-up process, respectively. Finally their relationship is tested with a set of potential explanatory variables that includes R&D expenditures, international competition, and structural characteristics. It appears that the distinction between technological and efficiency performances does matter and must be taken into account in the design of industrial policy. Copyright 1995 by The International Association for Research in Income and Wealth.

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