Explaining international productivity differences

In this paper we add new results to the investigation of productivity levels rather than productivity changes, as proposed by Hall/Jones (1996, 1997, 1999). To obtain measures of relative productivity levels we depart from traditional growth accounting and calculate the Malmquist index of total factor productivity change using a nonparametric approach to efficiency analysis for a broad sample of 87 countries. This index can be decomposed into measures of technological progress and efficiency change that are cumulated to level measures. The so obtained heterogeneity in productivity levels is then related to several determinants of technology driven growth by regression estimates. Doing this (a) we are able to provide confirmation of the validity of the decomposition of the Malmquist index and (b) we find innovation-related explanations for international technological frontier shifts and imitative catching up and falling behind.