A metafrontier production function for a Bayesian frontier model: A cross-country comparison

Abstract

Growth theory argues on the role of heterogeneity that can lead to multiple regimes examining countries’ performance. A metaproduction stochastic function for the Bayesian frontier model is developed to estimate productive performance across 109 countries over a 20-year period using two distinct frontiers (OECD vs. non-OECD countries). The metafrontier model is used to highlight heterogeneity among clusters of countries revealing catch up phenomena. The estimation procedure is based on the notion of stochastic ordering and relies on the solution of an optimization problem on the parameters’ posterior means. Empirical results reveal that heterogeneity indeed plays a significant and distinctive role.

Keywords:

• Technological heterogeneity
• Bayesian frontier model
• Stochastic metafrontier function
• spillovers

Acknowledgments

The authors would like to thank the editor of the Journal of Communications in Statistics—Case Studies and Data Analysis and the anonymous reviewers for their insightful comments and suggestions.

Notes

1 In the first stage efficiency estimates are provided for each group while in the second stage the metafrontier production function and the corresponding technology gaps are estimated by polling all the data of the participated groups using an LP problem.