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Published online by Cambridge University Press:  27 July 2017

Betty C. Daniel*
The University at Albany
Christian M. Hafner
Université catholique de Louvain
Léopold Simar
Université catholique de Louvain
Hans Manner
University of Graz
Address correspondence to: Betty C. Daniel, Department of Economics, The University at Albany, 1400 Washington Ave, Albany, NY 12222, USA; e-mail:


We estimate asymmetries in innovations to Solow residuals for 11 Organization for Economic Co-operation and Development (OECD) countries using stochastic frontier analysis. Likelihood ratio statistics and variance ratios imply that all countries with net energy imports have significant negative asymmetries, whereas other countries do not. We construct a simple theoretical model in which the measured Solow residual combines effects from technology, factor utilization, and the terms of trade. For oil importers, the model implies an asymmetric response of measured total factor productivity to oil price increases and decreases. When we condition Solow residuals separately on positive and negative oil price changes to allow asymmetric responses, evidence for remaining negative asymmetric innovations to the Solow residuals vanishes for all countries except Switzerland. Switzerland's relatively dominant financial sector suggests that their asymmetries could be due to a financial crisis, a hypothesis that we test and fail to reject.

Copyright © Cambridge University Press 2017 

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We would like to thank the associate editor, two anonymous referees, Jonas Dovern, Stephie Fried, and the participants in the European Workshop on Efficiency and Productivity in Verona for helpful comments and suggestions.



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