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Why do some countries produce so much more output per worker than others? - A note

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  • Boyle, Gerry

    (National University of Ireland Maynooth)

  • McQuinn, Kieran

    (Central Bank and Financial Services Authority of Ireland)

Abstract

In an important paper, Hall and Jones (1999) show that international differences in output per worker across 127 countries in 1988 are fundamentally determined by variations in, what they term, a country's ``social infrastructure''. This paper conducts a robustness check of their findings by implementing a testing framework that is radically different to their approach. Specifically, we estimate a stochastic, rather than a deterministic, production frontier and we also model the potential role of social infrastructure in explaining productivity in a single step, rather than the statistically unsatisfactory two-step method used by Hall and Jones. We obtain two important findings that are strongly supportive of Hall and Jones' results. First, the bulk of inter-country variation in output per worker is accounted for by differences in productivity. Second, social infrastructure is found to be a highly significant variable in explaining inter-country productivity differences.

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Bibliographic Info

Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 9/RT/04.

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Length: 12 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:cbi:wpaper:9/rt/04

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  1. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  2. Koop, Gary & Osiewalski, Jacek & Steel, Mark F J, 1999. " The Components of Output Growth: A Stochastic Frontier Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 455-87, November.
  3. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  4. Koop, Gary & Osiewalski, Jacek & Steel, Mark F J, 2000. "Modeling the Sources of Output Growth in a Panel of Countries," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(3), pages 284-99, July.
  5. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
  6. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  7. Jeffrey A. Frankel & David Romer, 1996. "Trade and Growth: An Empirical Investigation," NBER Working Papers 5476, National Bureau of Economic Research, Inc.
  8. Battese, George E. & Corra, Greg S., 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 21(03), December.
  9. KOOP , Gary & OSIEWALSKI, Jacek & STEEL , Mark, 1995. "Measuring the Sources of Output Growth in a Panel of Countries," CORE Discussion Papers 1995042, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  11. Nigel Pain & Dawn Holland, 1998. "The Diffusion Of Innovations In Central And Eastern Europe: A Study Of The Determinants And Impact O," NIESR Discussion Papers 205, National Institute of Economic and Social Research.
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Cited by:
  1. Krishna G. Iyer & Alicia N. Rambaldi & Kam Ki Tang, 2008. "Efficiency externalities of trade and alternative forms of foreign investment in OECD countries," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 749-766.

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