Evaluation of determinants of employment efficiency using stochastic frontier analysis and beta regression

Abstract

One of the main issues in today’s world is the fact that the world economy is not creating enough jobs, particularly for young people. Unemployment is one of the biggest issues in this modern life. This study investigates the most important determinants of employment efficiency for countries.  There are two steps in this study. First we measure countries’ employment efficiency by Stochastic Frontier Analysis (SFA) using the data from the Database and cover the period between 2009 and 2012. SFA, which is a parametric method, is used frequently to estimate the boundary functions and to measure the production effectiveness. At second stage, we expose the multiple relationships between the employment efficiency and the other variables using Beta regression approach which is performed in which the dependent variable is restricted to the standard unit interval such as rates and proportions. The most important factors which affect the employment efficiency were determined as Industry Value Added and Net Taxes.