Abstract
In this paper we employ a panel of state level manufacturing data for the U.S. to estimate productivity growth and its sources during the 1990s. Following (2002), we augment the usual Malmquist decomposition of productivity growth with a capital deepening component. We find that innovation was the primary determinant of manufacturing productivity growth in all states, but that most states ended the decade further from the production possibilities frontier than they started. Capital deepening contributed to labor productivity growth in all but three states, and explains at least half of the labor productivity growth in a dozen states.
In a second stage, we investigate various policy-related variables and their relationship to productivity growth and its components. We find that a growing technology sector was a strong contributor to labor productivity growth, while a growing public sector was largely a drag. Improvements in labor force quality appear to have had little impact on the pace of technical change or the diffusion of technology, but capital deepening was significantly greater in states with a more highly educated population.
We have benefitted from comments and discussion with Donna Ginther, Steve Brown, Thijs ten Raa, Daniel Henderson and others.
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Grosskopf, S., Hayes, K., Taylor, L.L. (2007). Sources of Manufacturing Productivity Growth: U.S. States 1990–1999. In: Färe, R., Grosskopf, S., Primont, D. (eds) Aggregation, Efficiency, and Measurement. Studies in Productivity and Efficiency. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-47677-3_6
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DOI: https://doi.org/10.1007/978-0-387-47677-3_6
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