Globalization and productivity: A robust nonparametric world frontier analysis

How to exit the economic recession and improve the economic condition in a globalized world is a central policy issue of importance. This paper examines whether countries that pursue outward orientation policies and that are increasingly economically integrated with the rest of the world have seen an increase in economic performance. Increasing globalization and interconnection among countries generates spatial and temporal dependence which will affect the production process of each country. We extend existing methodological tools - robust frontier in non parametric location-scale models - to estimate the world frontier of 44 countries over 1970-2007 and to obtain more reliable measure of productivity and efficiency to better investigate the driven forces behind the catching-up productivity process among countries. We explore the channels under which Foreign Direct Investment (FDI) and time affect the production process and its components: impact on the attainable production set (input-output space), and the impact on the distribution of efficiencies.