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Economics Research International
Volume 2012 (2012), Article ID 584869, 19 pages
http://dx.doi.org/10.1155/2012/584869
Research Article

Productivity of Nations: A Stochastic Frontier Approach to TFP Decomposition

1Escola de Economia de São Paulo, Fundação Getulio Vargas, Rua Itapeva, 474-11 São Paulo, SP, Brazil
2Confederação Nacional de Serviços, Rua Professor Tamandaré Toledo, 69-3 São Paulo, SP, Brazil

Received 31 August 2011; Accepted 26 October 2011

Academic Editor: Magda E. Kandil

Copyright © 2012 Jorge Oliveira Pires and Fernando Garcia. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper tackles the problem of aggregate TFP measurement using stochastic frontier analysis. We estimate a world production frontier for a sample of 75 countries over a long period. The “Bauer-Kumbhakar” decomposition of TFP is applied to a smaller sample in order to evaluate the effects of changes in efficiency (technical and allocative), scale effects, and technical change. Estimated technical efficiency scores are compared to productivity indexes offered by nonfrontier studies. We conclude that differences in productivity are responsible for virtually all the differences of growth performance between developed and developing nations and that a large part of this is due to allocative efficiency.