Exploring the Role of Institutions in Cross Country Malmquist Productivity Analysis: A Two-Stage Double Bootstrap DEA Approach

This paper explore the role of institutions to enhance the productivity growth across countries using a two stage Double Bootstrap Data Envelopment Analysis (DEA). The productivity growth is calculated on the basis of Malmquist productivity index. It also explores the sources of productivity growth and the influence of different types of institutions (Siddiqui and Ahmed, 2013a) on them. In the first stage, productivity growth and its decompositions a) technological change and b) efficiency change are estimated for a period of 1990-2000 for 78 countries. In the second stage, the impact of institutions on these estimates is analyzed through a bootstrapped regression. Findings suggest that institutions played a strong and positive role in enhancing cross country productivity mainly through promoting technological change but the evidences of institutions influencing efficiency change are not found. This study also shows that institutions that curb corruption, bureaucratic inefficiencies, lax regulations and unfriendly business policies, tend to have a larger effect on productivity growth than other two indices that curb political rents and that reduces transactional risks. However when they are aggregated, their impact is more pronounced than their combined individual impacts.