Decomposing regional productivity growth using an aggregate production frontier

The main contribution of this paper is the implementation of a new model which combines the two parametric approaches most commonly used in the productivity literature: fixed effects and stochastic frontiers. This allows us to discuss whether it is better to use average or frontier functions to estimate regional productivity. The empirical section uses panel data of Spanish regions over the period 1980-1995. Additionally, we calculate and decompose total factor productivity growth for the Spanish regions.