Multi‐Sector Nonparametric Production‐Frontier Analysis of the Economic Growth and the Convergence of the European Countries

Abstract

AbstractIn this paper, I apply the recent nonparametric multi‐sector production‐frontier methodology of Walheer (), tailored to analyse the economic growth and convergence of countries taking the sector heterogeneity and interdependence into account, to the European countries from 1995 to 2014. Thanks to a simple rewriting of his initial model, I also provide results at the sector level, which was not possible with the initial version of the methodology. My results confirm the non‐neutrality of technological change and highlight that human capital accumulation plays the biggest role in the increase of labour productivity. Technological change and capital accumulation also play an important, if smaller, role in the increase of output‐labour productivity. My results also confirm the presence of heterogeneity between sectors in Europe, which supports the use of multi‐sector analysis. Finally, my results confirm the presence of two groups, in terms of labour productivity, within the European counties: Eastern and Central European countries and the EU12. These two groups diverge over time. The results are not affected by robustness checks.