Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 394: Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries

Almas Heshmati ()
Additional contact information
Almas Heshmati: The United Nations University, World Institute for Development Economics Research, Postal: Katajanokanlaituri 6B, Fin-00160 Helsinki, Finland

Abstract: This paper is a survey of recent contributions to, and developments of, the relationship between outsourcing, efficiency and productivity growth in manufacturing and services. The objective is to provide a thorough and up-to-date survey that provides a significant discussion on data, as well as on the core methods of measuring efficiency and productivity. First, the readers are introduced to the measurement of partial and total factor productivity growth. Different parametric and non-parametric approaches to the productivity measurement in the context of static, dynamic and firm-specific modelling are discussed. Second, we survey the econometric approach to efficiency analysis. The issues of modelling, distributional assumptions and estimation methods are discussed assuming that cross-sectional or panel data are available. Third, the relationship between outsourcing and productivity growth in manufacturing and services is discussed. The correspondence between a number of hypotheses and empirical findings are examined. Examples of varieties of relevant empirical applications, their findings and implications are presented. Fourth, measurement of inputs and outputs in manufacturing and services are discussed. Finally, to promote useful research, a number of factors important to the analysis of outsourcing, efficiency and productivity growth in the service sector are summarised.

Keywords: Total factor productivity growth; technical efficiency; outsourcing; technical change; returns to scale; firms; manufacturing; services; measurement of inputs and outputs

JEL-codes: C20; D24; G20; L60; O47

43 pages, First version: August 14, 2000. Revised: October 18, 2001.

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