Stochastic analysis of the economic growth of OECD countries

Abstract

This study examined the determinants of economic development for the 34 member countries of the Organization for Economic Cooperation and Development (OECD) and analysed efficient uses of economic development resource endowments. The methodology included econometric panel data modelling and stochastic frontier analysis, using the Cobb-Douglas production function and trans-logarithmic functional form to analyse data from 2003 to 2012. Economic growth was measured by the gross domestic product (GDP) of each economy. As a result, the determinants of economic development were presented and a ranking of efficiency was obtained for all OECD economies throughout the period of analysis. It was concluded that countries with higher economic growth levels have higher efficiency rankings. For example, countries with higher efficiency rankings were Luxembourg and the U.S.; Chile and Mexico were ranked lower. Finally, there was a positive relationship between growth levels and technical efficiency levels.