Table of Contents
Economics Research International
Volume 2014 (2014), Article ID 376486, 8 pages
http://dx.doi.org/10.1155/2014/376486
Research Article

Technical Efficiency and Technical Change in Canadian Manufacturing Industries

Department of Economics, University of Regina, 3737 Wascana Parkway, Regina, SK, Canada S4S 0A4

Received 26 July 2014; Revised 5 December 2014; Accepted 17 December 2014; Published 31 December 2014

Academic Editor: Jean Paul Chavas

Copyright © 2014 Samuel Gamtessa. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This study applies the “true fixed effects” panel stochastic frontier methodology to the Canadian KLEMS data set to estimate technical change and technical efficiency in the Canadian manufacturing sector. To account for the endogeneity of capital inputs as well as the possible problems related to omitted variables, a two-stage residual inclusion method is pursued. The first stage is estimated using the dynamic panel GMM method. The results show that Canadian manufacturing industries experienced significant declines in technical efficiencies during the last ten years. This suggests that the observed slowdown in TFP growth during the recent past is partly due to declining technical efficiency.