European Competitiveness: A Semi-Parametric Stochastic Metafrontier Analysis at the Firm Level

In this paper a semiparametric stochastic metafrontier approach is used to obtain insight into firm-level competitiveness in Europe. We divert from standard TFP studies at the firm level as we simultaneously allow for inefficiency, noise and do not impose a functional form on the input-output relation. Using AMADEUS firm-level data covering 10 manufacturing sectors from seven EU15 countries, (i) we document substantial, persistent divergences in competitiveness (with Belgium and Germany as benchmark countries and Spain lagging behind) and a wide technology gap, (ii) we confirm the absence of convergence in TFP between the seven selected countries, (iii) we confirm that the technology gap is more pronounced for smaller firms, (iv) we highlight the role of post-entry growth for competitiveness