This study applies the ââ?¬Å?true fixed effectsââ?¬Â panel stochastic frontier methodology to the Canadian KLEMS data set to estimate\ntechnical change and technical efficiency in the Canadian manufacturing sector. To account for the endogeneity of capital inputs\nas well as the possible problems related to omitted variables, a two-stage residual inclusion method is pursued. The first stage is\nestimated using the dynamic panelGMMmethod.Theresults showthatCanadianmanufacturing industries experienced significant\ndeclines in technical efficiencies during the last ten years. This suggests that the observed slowdown in TFP growth during the recent\npast is partly due to declining technical efficiency
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