Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This paper presents alternative specifications of the production functions of a large panel of Swedish firms for the period 1992-2000. The period can be characterized as a transition when long-run productivity growth in the Swedish economy improved from being among the weakest to one of the strongest within the OECD. In order to present a detailed exploration of this dramatic change, the time trend and general index models are applied to estimate total factor productivity (TFP) growth, rate of technical change and returns to scale. The models are extended to allow for firm-specific as well as time-varying technical change. The parametric TFP measures are also compared with the non-parametric Solow residual, and several hypotheses are tested to explain the growth patterns in the Swedish economy. It is found that the improved growth rate, initially starting in large exporting manufacturing firms, after a deep economic crisis at the beginning of the 1990s, spilled over to the rest of the economy, both manufacturing and services.

Keywords: Technical change; total factor productivity growth; manufacturing; service; enterprise panel data

JEL-codes: C23; C52; C67; D24; L25; L60; L80; O30

32 pages, September 28, 2009

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