Transport infrastructure and technical efficiency in a panel of countries: Accounting for endogeneity in a stochastic frontier model

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The series Working Papers on Economics is published by the Office for Economic Studies at the Banco de la República (Central Bank of Colombia). The works published are provisional, and their authors are fully responsible for the opinions expressed in them, as well as for possible mistakes. The opinions expressed herein are those of the authors and do not necessarily reflect the views of Banco de la República or its Board of Directors.

AUTHOR OR EDITOR
Melo-Becerra, Ligia Alba
Ramírez-Giraldo, María Teresa

The series Borradores de Economía (Working Papers on Economics) contributes to the dissemination and promotion of the work by researchers from the institution. On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. This series is indexed at Research Papers in Economics (RePEc). The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

Publication Date:
Friday, 24 December 2021

Abstract

In this paper, a global production frontier is estimated using stochastic frontier models to assess the contribution of transport infrastructure to countries’ performance. We find that the role of infrastructure is underestimated under the exogeneity assumption indicating that handling endogeneity is crucial in the estimation. Results suggest that a better endowment of infrastructure contributes to economic growth, highlighting its importance in explaining differences in the economic performance of countries. Efficiency measures indicate that high-income countries are more efficient than low- and middle-income countries, suggesting that there is room for improving economic performance in countries with a lower income level. Better institutions also are essential to foster countries’ economic output.