Boyle, Gerry and McQuinn, Kieran
Why do some countries produce so much more output per worker than others? - A note.
In an important paper, Hall and Jones (1990) show that internatinal differences in output per worker across 127 countries in 1988 are fundamentally determined by variations in, what they term, a country's "social infrastructure". This paper conducts a robustness check of their findings by implementing a testing framework that is radically different to their approach. Specifically, we extimate a stochastic, rather than a deterministic, production frontier and we also model the potential role of social infrastructure in explaining productivity in a single step, rather thatn the statistically unsatisfactory two-step method used by Hall and Jones. We obtain two important findings that are strongly supportive of Hall and Jones' results. First, the bulk of inter-country variation in output per worker is accounted for by differences in productivity. Second, social infrastructure is found to be a highly significant variable in explaining inter-country productivity differences
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