Technical Efficiency, Technology Diffusion And Human Development (An Application Of Stochastic Frontier Analysis Approach)

We study the effect of Human Development and Technology Diffusion through imports and foreign direct investment(FDI) on domestic technical efficiency using stochastic frontier analysis. We used panel Data of Developing and Developed 72-country sample over 1990–2013. Furthermore we divide countries into Sub-Saharan Africa, Asia, Latin America, Middle East regions. In the analysis we used(FDI) and Imports from OECD countries as source of technology Diffusion, While,(HDI) is used as proxy for Human Development. We also include Openness and Urbanization as factors to influence technical efficiency. Results of the study show that Human Development and Technology Diffusion have a significant impact on domestic country's technical efficiency. Furthermore, we observe a complementarity between Technology Diffusion and domestic Human Development. In simple words, Human Development enhances the absorptive capacity of domestic economy to obtain benefit from Technology transferred. Other macro conditions such as urbanization also help to improve the technical efficiency of a country.