Decomposing Productivity Change in the Presence of Environmental Variables

This paper provides a decomposition of labor productivity growth into contributions associated with technical change, efficiency change, returns to scale, and environmental variables. The decomposition is based on parametric estimation of labor requirement functions. This approach is applied to a panel of Latin American distribution utilities between 1994 and 2001. The main results are a positive labor productivity growth averaging 7.5% per year, and that this is mainly due to a shift in the frontier.