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Measuring and Explaining the Impact of Productive Efficiency on Economic Development

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  • Ruwan Jayasuriya
  • Quentin Wodon

Abstract

A limitation of most empirical cross-country studies that focus on determinants of gdp or gdp growth 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 period 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. Copyright 2005, Oxford University Press.

Suggested Citation

  • Ruwan Jayasuriya & Quentin Wodon, 2005. "Measuring and Explaining the Impact of Productive Efficiency on Economic Development," World Bank Economic Review, World Bank Group, vol. 19(1), pages 121-140.
  • Handle: RePEc:oup:wbecrv:v:19:y:2005:i:1:p:121-140
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    Cited by:

    1. Sophia P. Dimelis & Sotiris K. Papaioannou, 2011. "Technical Efficiency and the Role of ICT: A Comparison of Developed and Developing Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 40-53, July.
    2. Thompson, Herbert Jr. & Garbacz, Christopher, 2007. "Mobile, fixed line and Internet service effects on global productive efficiency," Information Economics and Policy, Elsevier, vol. 19(2), pages 189-214, June.
    3. Wang, Miao & Wong, M. C. Sunny, 2012. "International R&D Transfer and Technical Efficiency: Evidence from Panel Study Using Stochastic Frontier Analysis," World Development, Elsevier, vol. 40(10), pages 1982-1998.
    4. Nada Karaman Aksentijevic & Zoran Jezic, 2009. "Human Resources development and research capacity and their impact on economic growth," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 27(2), pages 263-291.
    5. Sophia P. Dimelis & Sotiris K. Papaioannou, 2011. "Technical Efficiency and the Role of ICT: A Comparison of Developed and Developing Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 47(0), pages 40-53, July.
    6. Azar Dufrechou, Paola, 2016. "The efficiency of public education spending in Latin America: A comparison to high-income countries," International Journal of Educational Development, Elsevier, vol. 49(C), pages 188-203.

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