The Technical Efficiency of National Economies: Do the Institutions, Infrastructure and Resources Rents Matter?

M. Mamonov and Anna Pestova
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M. Mamonov: Center for Macroeconomic Analysis and Short-term Forecasting (CMASF) at the Institute for Economic Forecasting of the Russian Academy of Science, Moscow, Russia

Journal of the New Economic Association, 2015, vol. 27, issue 3, 44-78

Abstract: In this paper, we propose an idea of introducing the basic statement of the economic development theory on the role of institutions in economic growth and the infrastructure proxies into the augmented five-factor production function. As the fourth and fifth factors, we employ the aggregated index of institutional development designed by the Fraser Institute and the WDI indicators of infrastructural conditions, respectively, alongside with the standard set of labor, physical and human capital. We show that the correct estimation of total factor productivity requires, first, extracting resources rents from the output proxy. This allows eliminating of the exporters of natural resources from the top-10 technological leaders. Second, adjustment of output by Hodrick-Prescott filter is carried out. This has excluded the transfer of the output cyclical component to the technical efficiency indicators. Our analysis has shown that the technological progress is more rapid in developing countries as compared to developed economies. We perform our estimates under Stochastic Frontier Analysis (SFA) obtaining data from the World Bank, IMF, Fraser Institute and UNESCO on 140 countries over the 1980-2010.

Keywords: production functions; institutions; infrastructure; resources rents; technological efficiency; SFA; Malmquist index (search for similar items in EconPapers)
JEL-codes: O47 O57 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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