Cross Countries Economic Performances - SPF Approach

Alali, Walid Y. (2010): Cross Countries Economic Performances - SPF Approach.

Abstract

The differences in technical inefficiency (inefficient allocation of production inputs) explain the diverse cross-country economic performances, using estimating a “global” stochastic production frontier (SPF) model, and (Rodrik (2000)’s taxonomy of institutions), to compare the mean level of technical inefficiency for each country per period. Our model, consider three variables dimensions – human capital, openness, and institutions. Institutions are more fundamental to the sources of technical inefficiency. Specifically, the rule of law has a direct impact on improving technical efficiency. Democracy and sound money, do not have a direct impact on technical efficiency. However, their interactions with human capital are statistically significant. It points out the possibility that a minimum level of human capital matters for these two aspects of institutions to have any impact on technical efficiency. Regulation, on the other hand, shows a threshold effect. That said, after reaching a threshold level of regulation, excessive regulation leads to technical inefficiency.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic Development, Institutions, Policy, Growth, Institutions Performance, Stochastic Production Frontier (SPF)
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development

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