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Cross Countries Economic Performances - SPF Approach

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  • Alali, Walid Y.

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.

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  • Alali, Walid Y., 2010. "Cross Countries Economic Performances - SPF Approach," MPRA Paper 115613, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:115613
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    More about this item

    Keywords

    Economic Development; Institutions; Policy; Growth; Institutions Performance; Stochastic Production Frontier (SPF);
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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