Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2006:17: Relative sources of European regional productivity convergence: A bootstrap frontier approach

Kerstin Enflo () and Per Hjertstrand ()
Additional contact information
Kerstin Enflo: Department of Economic History, Postal: Department of Economic History, School of Economics and Management, Lund University, Box 7083, 220 07 Lund, Sweden
Per Hjertstrand: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: We address the issue of Western European regional productivity growth and convergence by means of Data Envelopment Analysis (DEA), decomposing labor productivity into efficiency change, technical change and capital accumulation. The decomposition shows that most regions have fallen behind the production frontier in efficiency and that capital accumulation has had a diverging effect on the labor productivity distribution. We also account for the inherent bias and the stochastic elements in the efficiency estimation using bootstrapping methods. We find that the relative ranking of the bias-corrected efficiency scores remains stable after the bias correction and that the DEA successfully identifies the regions on the production frontier as significantly more efficient than other regions.

Keywords: Bootstrap; DEA; Efficiency; Regional Convergence

JEL-codes: C14; C15; O47; R11

22 pages, August 14, 2006

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