Explaining TFP growth in the European Union at the sector level

This paper analyses Total Factor Productivity (TFP) growth in the EU for the main sectors of private activity by adopting a production frontier approach. This analysis enables us to examine the determinants of EU sector productivity growth in European countries and the channels through which different economic variables can influence productivity growth, whether by conditioning improvements in efficiency levels or by contributing to technical change. Our results show that all European sectors experienced shifts in their production frontier but need an enhancement of their catching-up capabilities; the importance of the sector structure is also manifest in explaining productivity; and infrastructure and human capital are found to be major determining factors of TFP growth.