Financial Openness and Technological Catch-up: Empirical Evidence from the Mediterranean Basin

This study analyses the effects of financial openness on productive efficiency and technology catch-up in four countries in the Mediterranean Basin (Algeria, Egypt, Morocco and Tunisia) as compared to the situation about the same in a group of developed countries (France, Germany, Japan, and the UK)over the period 1985-2005. Using the stochastic production frontier method with variable inefficiency (Battese and Coelli, 1995) and the metafrontier technique(Battese et al. 2004), we show, with the exception of Tunisia, that the productive efficiency of the first group of countries has continuously declined. We also identify an ever-widening technology gap for the first-group countries relatively to the second-group countries caused by among other things, a slowdown their financial openness from the second half of the 1990s.financial openness, productive efficiency, technology catch-up