Scope and method of study. This dissertation makes multilateral TFP comparisons of manufacturing industries in 12 OECD counties beginning in 1980. By employing a multilateral productivity index based on the Malmquist index (CCD index: Caves, Christensen, and Diewert, 1982), it identifies changes in total factor productivity over time and across countries at a manufacturing industry level. It also uses the stochastic frontier approach to investigate the effects of institutional factors on technical inefficiency in manufacturing industries. Institutional factors considered are economic freedom, market openness, and the degree of corruption.; Findings and conclusions. There were large productivity differences in the manufacturing sector or in separate manufacturing industries across countries. The United States was the highest productivity country during the 1980s and the 1990s in most industries among the countries compared. This finding confirms that there were substantial technology differences in the manufacturing sector as a whole and in 2-digit ISIC manufacturing branches among 12 OECD countries. TFP differences, however, decreased over time from the 1980s to the 1990s. The differences fluctuated yearly, but in the long run diminished in a very stable manner. The existence of strong empirical evidence in support of β-convergence and σ-convergence supports the idea that technology transfer occurs over time and across countries. Technology transfer or R&D activity takes an important role in determining TFP growth on a specific industry level for a country behind the technological frontier. TFP growth in the frontier country induces faster TFP growth than the following countries by shifting out the production possibility set. Economic freedom has a positive effect on productivity levels of manufacturing industries. This finding confirms that greater economic freedom leads to greater productivity even in manufacturing industries. The institutional factors are key determinants of the inefficiency of the manufacturing sector as a whole and in individual manufacturing industries. The new finding confirms that the statement, “institutions affect economic performance (Adkins, Moomaw and Savvides, 2002)” is valid even under the manufacturing branches.
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