Productive efficiency and growth policies for the Caribbean

Productive (economic) efficiency and factors affecting it was evaluated in the Caribbean between 1983 to 1992. Results from non-parametric programming indicated that efficiency (i.e. pure technical, allocative and economic) m easures were lower and more variable in Caribbean than in other Western Hem isphere countries (i.e. North America and Latin America). Tobit regression analysis indicated higher levels of private and foreign investments, produc tive infrastructure, credit availability, education level, and consumption of domestically produced goods had positive impacts on the efficiency measu res. On the other hand, higher levels of public expenditure, income tax, an d export taxes, and higher inflation rates had negative effects. These resu lts support the current trend towards advocating more open economies (i.e. letting the free market work) and encouraging governments to confine their functions to facilitative/regulatory type roles and to undertaking tasks th at are not generally undertaken by the private sector (e.g. developing infr astructure, providing education). Although, generally, the same factors wer e associated with efficiency in the Caribbean and Latin America, their rela tive impacts differed. Consequently, in order to improve efficiency in the Caribbean countries, relatively greater emphasis should be placed on encour aging foreign and private investment and developing infrastructure than wou ld be the case in Latin American countries.