Technological change, efficiency gains and capital accumulation in labour productivity growth and convergence: an application to the spanish regions

The main objective of this paper is to analyse labour productivity growth and convergence in the Spanish regions between 1965 and 1995, decomposing total factor productivity (TFP) gains into technological progress and efficiency change by means of Malmquist productivity indices. On the basis of chis decomposition, labour productivity growth is broken down into components attributable to technological change (shifts in the frontier), efficiency gains (movements toward the frontier) and capital accumulation (movements along the frontier). The ap-proach followed in this study is based on work initiated by Fire et al. (1994), where a link between the economic growth and convergence literature and the production frontier approach was established. Furthermore, in the spirit of Quah's approach, the evolution of the whole distribution is considered. Thus, the analysis of the dynamics of the entire distribution of labour productivity and che factors behind it -technological progress, efficiency gains and capital accu-mulation- combine both approaches, yielding new insights into the process of productivity growth and convergence experienced by the Spanish regions over the last thirty years