Decomposition of the regional productivity in the colombian manufacturing industries during 1992-2010: A time varying stochastic frontier approach

© 2015, Universidad de los Andes, Facultad de Economia. All rights Reserved. Industrial productivity was estimated by time varying stochastic production frontiers using Colombia's industrial aggregate data by region and sector from 1992 to 2010. The results show a high individual heterogeneity, a higher industrial growth in the major cities and lower growth in the small ones. In addition to this, the variance decomposition analysis of technical efficiency allows to find a positive correlation between changes in average efficiency and change by reallocation of resources. The reallocation process was led by regional concentration of the industry. The importance of regional characteristics on industrial performance and the relevance of strengthening competitive factors were confirmed. These findings lead to define strategies based on leading sectors in order to promote industrial development in the regions.