The Magnitude of the Task Ahead: Macro Implications of Heterogeneous Technology

Eberhardt, Markus; Teal, Francis

Abstract

The empirical growth literature is dominated by accounting and regression methods which assume common production technology across countries. Our empirical model relaxes this assumption and further allows unobservable determinants of output (Total Factor Productivity, TFP) to differ across countries and time, while accounting for endogeneity and cross-section correlation arising from global shocks. Using manufacturing sector data for 48 economies we show that the assumption of common technology creates questionable results in accounting exercises and is rejected in our regressions. We illustrate that the erroneous choice of homogeneous technology has substantial impact on patterns and magnitudes of resulting TFP estimates.

Citation

Eberhardt, M., & Teal, F. (2020). The Magnitude of the Task Ahead: Macro Implications of Heterogeneous Technology. Review of Income and Wealth, 66(2), 334-360. https://doi.org/10.1111/roiw.12415

• Journal Article Type: Article
• Acceptance Date: Sep 13, 2018
• Online Publication Date: Mar 25, 2019
• Publication Date: 2020-06
• Deposit Date: Sep 14, 2018
• Publicly Available Date: Mar 26, 2021
• Journal: Review of Income and Wealth
• Print ISSN: 0034-6586
• Electronic ISSN: 1475-4991
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 66
• Issue: 2
• Pages: 334-360
• DOI: https://doi.org/10.1111/roiw.12415
• Keywords: Cross-country analysis; Heterogeneous technology; Total factor productivity
• Public URL: https://nottingham-repository.worktribe.com/output/1075255
• Publisher URL: https://onlinelibrary.wiley.com/doi/full/10.1111/roiw.12415
• Additional Information: This is the peer reviewed version of the following article: Eberhardt, M. and Teal, F. (2020), The Magnitude of the Task Ahead: Macro Implications of Heterogeneous Technology. Review of Income and Wealth, 66: 334-360, which has been published in final form at Eberhardt, M. and Teal, F. (2019), The Magnitude of the Task Ahead: Macro Implications of Heterogeneous Technology. Review of Income and Wealth. doi:10.1111/roiw.12415. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
• Contract Date: Sep 14, 2018