Explaining country's efficiency performance

This paper differs from the current literature in supposing that human capital influences growth indirectly and not directly as the new growth theory assumes, through its impact on a country's efficiency performance. We also allow for the impact of openness, terms of trade, human capital and inflation on efficiency performance. This approach offers additional evidence as to why growth rates differ among countries. A DEA methodology is adopted to estimate the efficiency index of each country. The results suggest that movements towards openness increase the efficiency performance of the non-OECD countries, while the OECD countries experienced slightly faster efficiency changes relative to the formers. (c) 2006 Elsevier B.V. All rights reserved.