Technology Gaps: A New Index of Technology Heterogeneity

Technology gaps can be used to measure the technology heterogeneity or the difference in technology and production techniques employed by different firms. In this paper the gap between the metafrontier and the firm-specific frontier is defined to be this new index. In order to obtain the production frontier and the index for each firm, the varying coefficients regression model is used on the reproduced input-output data, which is shown to be an approximate piecewise Cobb-Douglas. Then the proposed method is applied in the analysis of panel data on Chinese 33 industries from 2000 to 2003, and the result shows that the difference of technology gaps between industries is quite considerable in China.