Modeling the Sources of Output Growth in a Panel of Countries

This article seeks to improve understanding of cross-country patterns of economic growth. It adopts a stochastic production-frontier model that allows for the decomposition of output change into input, efficiency, and technical change. The production frontier is assumed to depend on effective inputs rather than measured inputs. We develop a model in which effective inputs depend on observed factor use and a correction term that depends on variables such as education. A further extension over related work is our use of a production frontier that varies over regional country groups. Empirical results indicate that both these extensions are very important.