Measuring and Explaining the Impact of Productive Efficiency on Economic Development
A limitation of most empirical cross-country studies that focus on determinants of gross domestic product (GDP) is that they fail to distinguish explicitly between inputs used in production and conditions that facilitate production. For example, ph...
| Main Authors: | , |
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| Format: | Journal Article |
| Language: | English en_US |
| Published: |
Published by Oxford University Press on behalf of the World Bank
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2005/01/17747432/measuring-explaining-impact-productive-efficiency-economic-development http://hdl.handle.net/10986/16483 |
| Summary: | A limitation of most empirical
cross-country studies that focus on determinants of gross
domestic product (GDP) is that they fail to distinguish
explicitly between inputs used in production and conditions
that facilitate production. For example, physical capital,
human capital, and labor are production inputs, whereas the
quality of institutions, macroeconomic stability, and market
quality are conditions that facilitate production. This
article takes this distinction seriously and uses a
stochastic frontier approach to study factors affecting
economic performance. A panel data set of 71 countries for
the 1980-98 periods is used to estimate a production
frontier with physical capital, human capital, and labor as
inputs. The article also analyzes what drives productive
efficiency, using the institutional framework, macroeconomic
stability, market quality, and urbanization as possible
explanatory factors. Urbanization turns out to be an
important determinant, with the rule of law, inflation rate,
and market quality also affecting productive efficiency. |
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