The World Technology Frontier: What Can We Learn from the US States?

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Abstract

We re-estimate the world technology frontier non-parametrically using a dataset covering OECD country-level data and US state-level data on GDP per worker and the stocks of physical capital, unskilled labour and skilled labour. The auxiliary use of US state-level data significantly reduces the upward bias in cross-country estimates of technical efficiency, and so does allowing for imperfect substitutability between skilled and unskilled labour. We then use our adjusted estimate of the world technology frontier in a series of decompositions of productivity differences and sources of economic growth in the OECD in 1970–2000, including also ‘appropriate technology vs. efficiency’ decompositions.

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