ABSTRACTThis paper uses a stochastic frontier production‐function model to measure and compare productivity efficiency in the manufacturing sector of states in the United States over the period 1959–1972. Based on this model we find considerable variations in productive efficiency across states. A large portion of the variation is found to be related to regional differences in labor‐force characteristics, levels of urbanization and industrial structure. We also examine the relationship between productive efficiency and the subsequent growth of manufacturing and find some evidence of a weak relationship between efficiency and the growth of emplo