Measuring the economic efficiency performance in Latin American and Caribbean countries: An empirical evidence from stochastic production frontier and data envelopment analysis

Abstract

The development of the global economy has raised concerns about economic efficiency and productivity. In this context, understanding the concepts of economic efficiency and productivity and the knowledge of the techniques available for their measurement are also of fundamental importance. Thus, the objective of the present study is to measure the economic efficiency performance of 14 countries from the Latin America and the Caribbean (LAC) region in the period from 1990 to 2017. Analysing the economic performance of these countries with linear Cobb-Douglas production function, two methods were used: the parametric stochastic frontier analysis (SFA) and non-parametric data envelopment analysis (DEA). Both approaches (SFA and DEA) show that Panama is the most economically efficient country in the LAC region, followed by Chile. Concerning other countries, the choice between the SFA and DEA models affects the ratings. Results indicate that Brazil (SFA) and Nicaragua (DAE) are the least economically efficient LAC countries.