Comparing economic performance in the presence of diversity

Abstract

International performance comparisons are very attractive to policy-makers, with good reason. In the absence of any practical criteria for judging optimal performance, cross-country comparisons offer one of the few ways in which policy-makers can assess performance outcomes of policy measures and economic processes. This paper explores some dimensions and implications of diversity for inter-country comparisons. There are serious difficulties in formulating hypotheses free of unwarranted assumptions, in interpreting cross-country indicators, and in comparing countries through official statistics. Comparisons can be useful and productive, but need to take heterogeneity into account, using interpretative care to distinguish between real differences and statistical or indicator artefacts.