MEASURING MACROECONOMIC PERFORMANCE IN THE OECD - A COMPARISON OF EUROPEAN AND NON-EUROPEAN COUNTRIES

We study the macroeconomic performance of 19 OECD countries over the p eriod 1970-1990. Performance is defined in terms of the ability of a c ountry's macroeconomic managers to provide four services to their citi zens: 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 perf ormance frontier, and to measure the performance of each country in ea ch year relative to the frontier. We then add two environmental disame nities (carbon and nitrogen emissions) to the service list, and repeat the analysis to see if the performance rankings change. Throughout th e 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 p erformance of the European countries declines, when the environmental disamenities are added to the service list.