Institutions and Technical Efficiency: A Stochastic Frontier Approach

Talent Zwane, Mduduzi Biyase and Thandolwethu Binda
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Talent Zwane: School of Economics, University of Johannesburg, South Africa
Thandolwethu Binda: School of Economics, University of Johannesburg, South Africa

Economia Internazionale / International Economics, 2021, vol. 74, issue 4, 415-438

Abstract: The effect of institutions on economic growth and development has been the subject of robust debate among economists and policy makers in both developed and developing countries. This paper employ Penn World Table, World Development Indicators and Barro-Lee data to estimate a panel stochastic production frontier model and the technical efficiency of output for 11 Southern African Development Community (SADC) countries for the period 1980–2013. The empirical findings from the stochastic production frontier based on the Cobb-Douglas production function model shows that institutions promote economic growth. More precisely, the results show a positive and statistical significant effect of political stability on economic growth in the SADC region. Although insignificant, voice accountability is found to have a positive impact on economic growth. Other variables that present positive and significant impact on economic growth include physical and human capital, reinforcing earlier studies in this field. On the other hand, population growth rate presents a negative and statistically significant impact on growth in the SADC region. The results of the determinants of technical inefficiency model indicates that voice accountability and political stability presents positive and statistically significant impact on technical inefficiency. However, population growth rate presents negative and significant coefficients on technical inefficiency in the region. The paper recommends that for growth in the SADC region to be sustainable, countries ought to invest in productivity and institutional enhancing factors, such as physical capital, human capital, voice accountability political stability and reduce population growth rate. Istituzioni ed efficienza tecnica: un approccio di frontiera stocastica Questo articolo stima tramite un modello panel a frontiera stocastica 11 paesi SADC nel periodo 1980-2013. I risultati empirici basati sul modello Cobb-Douglas mostrano che le istituzioni promuovono la crescita economica. Vi è un effetto statisticamente positivo della stabilità politica sulla crescita. Sebbene insignificante, la variabile voice and accountability risulta avere un impatto positivo sulla crescita. Altre variabili che presentano un impatto significativamente positivo sono il capitale fisico ed umano. Il tasso di crescita della popolazione presenta un impatto negativo e statisticamente significativo.Affinché la crescita nella regione SADC sia sostenibile, i paesi dovrebbero investire nella produttività e nei fattori istituzionali trainanti.

Keywords: Technical Efficiency; Stochastic Frontier; Institutions; Economic Growth; SADC (search for similar items in EconPapers)
JEL-codes: C23 C24 C87 (search for similar items in EconPapers)
Date: 2021
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