Cross-sectoral patterns of efficiency and technical change in manufacturing: A stochastic frontier analysis

This paper uses data from 11 countries for 19 years to investigate the forces driving output change in 6 manufacturing sectors. A stochastic production frontier model is adopted which allows for the decomposition of output changes into three types of change: technical, efficiency and input. This framework allows, among other things, for the investigation of i) the relative roles of the three components of output growth in each sector, ii) the manner in which efficiency change moves over the business cycle, and iii) the determination of potential technical progress spillovers from one sector to another. To estimate the model, Bayesian methods with Gibbs sampling are used.