Be productive or face decline. On the sources and determinants of output growth in Italian manufacturing firms

This article investigates the sources and determinants of output growth of Italian manufacturing firms. Applying stochastic frontier techniques, we decompose output growth into factor accumulation and TFP growth for the period 1998–2003. TFP growth is further decomposed into technological change, efficiency change and scale effects. Two key results emerge from the analysis. After confirming that both input accumulation and TFP growth are important in explaining output growth, we show that efficiency change (technological catch-up) is the most significant component of TFP growth in explaining output growth distribution. Furthermore, using a specific model of the asymmetric error component, we find that R&D spillovers, banking efficiency and public infrastructures have statistically significant and economically relevant effects on technological catch-up.