Decomposition of total factor productivity growth in U.S. states

This paper applies the stochastic frontier production model to the lower 48 U.S. states over the period 1977–2000 to decompose the sources of total factor productivity (TFP) growth into technological progress, changes in technical efficiency, and changes in economies of scale. We find that technological progress comprises the majority of TFP growth but that differences in efficiency change explain cross-state differences in TFP growth. TFP growth was greater towards the end of the time period.