Total factor productivity growth and convergence in the petroleum industry : empirical analysis testing for convexity

Kerstens, Kristiaan & Managi, Shunsuke (2012) Total factor productivity growth and convergence in the petroleum industry : empirical analysis testing for convexity. International Journal of Production Economics, 139(1), pp. 196-206.

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While economic theory acknowledges that some features of technology (e.g., indivisibilities, economies of scale and specialization) can fundamentally violate the traditional convexity assumption, almost all empirical studies accept the convexity property on faith. In this contribution, we apply two alternative flexible production technologies to measure total factor productivity growth and test the significance of the convexity axiom using a nonparametric test of closeness between unknown distributions. Based on unique field level data on the petroleum industry, the empirical results reveal significant differences, indicating that this production technology is most likely non-convex. Furthermore, we also show the impact of convexity on answers to traditional convergence questions in the productivity growth literature.

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4 citations in Scopus
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1 citations in Web of Science®

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ID Code: 75440
Item Type: Journal Article
Refereed: Yes
Keywords: Convergence; Luenberger productivity indicator; Non-convexity; Productivity
DOI: 10.1016/j.ijpe.2012.04.008
ISSN: 0925-5273
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Deposited On: 25 Aug 2014 01:50
Last Modified: 25 Aug 2014 23:00

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