Total Factor Productivity estimation using control function approaches: a new implementation applied to the South African manufacturing sector

This paper introduces a new implementation of the control function approach often used to estimate total factor productivity that allows for a more consistent convergence of production function elasticities. Using this approach, we update Kreuser and Newman's productivity estimates for the South African Manufacturing Sector using Administrative data from 2009-2017. Limited productivity growth is found for the period from 2009-2017, with the majority of variance in sectoral productivity attributable to allocative efficiency. We find that more allocatively efficient industries are generally more capital intensive and have significantly higher capital elasticities while having only slightly higher labour elasticities.