Measuring macroeconomic performance in the OECD: A comparison of European and non-European countries

Abstract

We study the macroeconomic performance of 19 OECD countries over the period 1970–1990. Performance is defined in terms of the ability of a country's macroeconomic managers to provide four services to their citizens: a high level of real GDP per capita, a low rate of inflation, a low rate of unemployment and a favorable trade balance. We use linear programming techniques to construct a best practice macroeconomic performance frontier, and to measure the performance of each country in each year relative to the frontier. We then add two environmental disamenities (carbon and nitrogen emissions) to the service list, and repeat the analysis to see if the performance rankings change. Throughout the analysis emphasis is placed on a comparison of the performance of 14 European OECD countries with that of five non-European OECD countries. We find that performance rankings do change, and that the relative performance of the European countries declines, when the environmental disamenities are added to the service list.