Technical change and total factor productivity growth in swedish manufacturing industries

This paper is concerned with the measurement of total factor productivity(TFP) growth and technical change in Swedish manufacturing industries during the period 1964–1989. Two alternative formulations of technical change, viz., the time trend model and the general index model are used for measuring TFP growth and technical change. Measures of these are embedded in a cost minimization framework where we estimate the translog cost function along with the associated cost share equations. The cost function accommodates industry-specific variability through an error component model. The models are estimated using the iterative seemingly unrelated regression method after some transformations to the cost function. Empirical results show that the general index model is superior to the time trend model when the pattern of technical change and total factor productivity growth are examined.