Convergence in Colombia’s Total Factor Productivity: A Spatial Analysis 1992-2022

This study identifies key determinants of manufacturing value added and estimates Total Factor Productivity (TFP) across Colombia’s departments. It also examines manufacturing productivity convergence, testing the absolute β-convergence hypothesis and estimating the half-life and speed of convergence to assess how quickly productivity disparities diminish. Using data from 1992 to 2022, the study applies the Levinsohn-Petrin (LP) method and the Generalized Method of Moments (GMM) following Wooldridge within a KLHEMIS framework. After estimating input elasticities, TFP is computed as the difference between value added and factor contributions. The research further evaluates productivity convergence through spatial and non-spatial analyses using a Dynamic Spatial Durbin Model and a Unit Root Test for panel data. Results indicate that non-qualified workers, human capital, electricity consumption, and investment in R&D and advertising significantly impact manufacturing value added. Both LP and GMM models suggest decreasing returns to scale. TFP growth follows a cyclical pattern, averaging 2.5% annually. The convergence analysis reveals significant interdepartmental productivity alignment, supporting absolute β-convergence. Additionally, estimates of half-life and speed of convergence provide insights into the rate at which productivity disparities decline. This study offers a detailed regional TFP estimation for Colombia’s manufacturing sector, incorporating spatial analysis. By testing absolute β-convergence and quantifying convergence dynamics, it provides novel insights into productivity growth and regional integration. JEL Codes : O40, O47, O54, L60.