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

Abstract

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.