Working Paper

International Benchmarking for Country Economic Diagnostics : A Stochastic Frontier Approach

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collection.link.5
https://openknowledge.worldbank.org/handle/10986/9
collection.name.5
Policy Research Working Papers
dc.contributor.author
Kumbhakar, Subal C.
dc.contributor.author
Loayza, Norman V.
dc.contributor.author
Norambuena, Vivian
dc.date.accessioned
2020-07-02T16:33:26Z
dc.date.available
2020-07-02T16:33:26Z
dc.date.issued
2020-06
dc.date.lastModified
2021-11-28T00:10:45Z
dc.description.abstract
This paper discusses and illustrates the analytical foundations of international comparisons (or benchmarking) for assessing a country's potential for improvement along various dimensions of social and economic development. By providing a methodology for international benchmarking, discussing various alternatives and choices, and presenting a cross-country illustration, the paper can help practitioners be less arbitrary and more systematic in their approach to international comparisons, as well as more realistic in their expectations for a country's improvement. The paper presents the stochastic frontier approach and applies it to estimate feasible frontiers or benchmarks for each variable, country, and year. It then interprets a country's (one-sided) departure from the benchmark as inefficiency or potential for improvement. This contrasts with the literature that compares countries by looking at raw variables or indicators, without considering that countries differ in structural endowments that constrain the maximum performance that a country could achieve in a policy-relevant horizon. The Stochastic Frontier approach also improves upon the literature that uses regression residuals to measure performance. Regression residuals are hard to interpret as inefficiency, because they are mixed with noise and take positive and negative values. As an illustration, the paper uses a panel of 142 countries with yearly data for 2005-14 and considers a set of 10 development indicators. It finds that the potential for improvement does not follow a simple relationship with economic development, with some lower-income countries being closer to their own feasible frontier than more advanced countries are.
en
dc.identifier
http://documents.worldbank.org/curated/en/369581593438524015/International-Benchmarking-for-Country-Economic-Diagnostics-A-Stochastic-Frontier-Approach
dc.identifier.uri
http://hdl.handle.net/10986/34019
dc.language
English
dc.publisher
World Bank, Washington, DC
dc.relation.ispartofseries
Policy Research Working Paper;No. 9304
dc.rights
CC BY 3.0 IGO
dc.rights.holder
World Bank
dc.rights.uri
http://creativecommons.org/licenses/by/3.0/igo
dc.subject
ECONOMIC DEVELOPMENT
dc.subject
BENCHMARKING
dc.subject
COUNTRY DIAGNOSTICS
dc.subject
STOCHASTIC FRONTIER
dc.subject
STRUCTURAL ENDOWMENT
dc.title
International Benchmarking for Country Economic Diagnostics
en
dc.title.subtitle
A Stochastic Frontier Approach
en
dc.type
Working Paper
en
okr.crossref.title
International Benchmarking for Country Economic Diagnostics: A Stochastic Frontier Approach
okr.date.disclosure
2020-06-29
okr.doctype
Publications & Research
okr.doctype
Publications & Research :: Policy Research Working Paper
okr.docurl
http://documents.worldbank.org/curated/en/369581593438524015/International-Benchmarking-for-Country-Economic-Diagnostics-A-Stochastic-Frontier-Approach
okr.googlescholar.linkpresent
yes
okr.identifier.doi
10.1596/1813-9450-9304
okr.identifier.externaldocumentum
090224b087b06dcc_1_0
okr.identifier.internaldocumentum
32190944
okr.identifier.report
WPS9304
okr.imported
true
en
okr.language.supported
en
okr.pdfurl
http://documents.worldbank.org/curated/en/369581593438524015/pdf/International-Benchmarking-for-Country-Economic-Diagnostics-A-Stochastic-Frontier-Approach.pdf
en
okr.statistics.combined
645
okr.statistics.dr
369581593438524015
okr.topic
Macroeconomics and Economic Growth :: Economic Development
okr.topic
Macroeconomics and Economic Growth :: Economic Growth
okr.topic
Macroeconomics and Economic Growth :: Economic Theory & Research
okr.unit
Development Research Group, Development Economics

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