Abstract

The main aim of this study is to measure the value of the capital in labour productivity growth at Turkish manufacturing industry within the years of 1980-2011 by applying an econometric model that account for cross-section dependence and heterogeneity of production technology in a panel setting, which is not done before. That is the common correlated effects (CCE) type estimator of Pesaran is applied. The cross-sectional averages of the dependent and explanatory variables are used at the CCE estimator. The main findings of the study are; first, individual industry regression results convey apparent technology heterogeneity across the industries. Second, imposing slope homogeneity restriction in the pooled models lends a lot of precision to the capital productivity estimate. When tested, the industries are not poolable. But, interestingly, the mean-group and pooled estimates of technology coefficients are close. The technology estimates are sensitive to the presence of observed and unobserved common factors, justifying the use of CCE estimators.