Human Flourishing and Technical Efficiency: Evidence from Panel Data

Document Type : Research Paper


1 Ph.D Student in Economics, Faculty of Administrative Sciences and Economics, University, of Isfahan Isfahan, Iran

2 Professor of Economics, Faculty of Administrative Sciences and Economics, University of Isfahan , Isfahan, Iran

3 Associate Professor of Statistics, Faculty of Mathematics and Statistics, University of Isfahan , Isfahan, Iran

4 Associate Professor of Economics, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran


According to James Heckman, human development is economic development. This means that nurturing flourish and capable human beings through the channel of fostering valuable skills under the influence of various factors (environment, school, and parental investment) lead to reducing inequality, increasing economic productivity, and production capacity. The stock of these skills in adulthood leads to the various outcomes that Heckman and Corbin (2016) call human flourishing. Therefore, an index called the Human Flourishing Index (HFI) is proposed and calculated for the first time in this study.
Accordingly, the present study establishes a link between Heckman's theory and efficiency analysis by inserting HFI as a proxy of human capital in the production function, and by using the Stochastic Frontier Analysis (SFA) model of Battese and Coelli (1993; 1995); examines the technical efficiency of the production of the selected countries group and identifies the factors affecting it in the period of 2003-2017.
Estimation of a frontier production function and the inefficiency effects model indicate a positive and significant effect of HFI on the per capita production of the selected countries group and four factors of official entrance age to pre-primary education, pupil-teacher ratio (pre-primary), percentage of enrolment in primary education in private institutions and gross enrolment ratio (secondary) on the technical efficiency of production. The results also indicate the increasing trend of HFI and technical efficiency of the selected countries group during the period.
JEL Classification: C12; C23; J24; O15


Aigner, D., Lovell, C. A. K., & Schmidt, P. (1977). Formulation and Estimation of Stochastic Frontier Production Function Models. Journal of Econometrics 6, 21–37.
Borghans, L., Duckworth, A. L., Heckman, J. J., & Ter Weel, B. (2008). The economics and psychology of personality traits. Journal of Human Resources, 43(4), 972–1059.
Battese G.E, Coelli T. J. (1995).Amodel for Technical Inefficiency Effect in a Stochastic Frontier Production Function for Panel Data. Jornal of Empirical Economics, 20: 325-332.
Battese, G. E., & Corra, G. S. (1977). Estimation of a production frontier model: with application to the pastoral zone of Eastern Australia. Australian journal of agricultural economics21(3), 169-179.
Cunha, F., & Heckman, J. (2007). The technology of skill formation. American Economic Review, 97(2), 31–47.
Cunha, F., Heckman, J. J., Lochner, L., & Masterov, D. V. (2006). Interpreting the evidence on life cycle skill formation. Handbook of the Economics of Education, 1, 697–812.
Coelli T. J., & G. E. Battese (1996), Identification of Factors which Influence the Technical Inefficiency of Indian Farmers, Australian Journal of Agricultural Economics, 40(2), 103–128.
Coelli, T. J. (1995). Estimators and Hypothesis Tests for Stochastic Frontier Function: A Monte Carlo Analysis, The Journal of Productivity Analysis, 6(3): 247–268.
Coelli, T. J. (1994). A Guide to Frontier Version 4.1: A Computer Program for Stochastic Frontier Production and Cost Function Estimation. Department of Econometrics, University of New England, Australia.
Garcia, J. L., Heckman, J. J., & Ziff, A. L. (2018). Gender differences in the benefits of an influential early childhood program. European Economic Review.
García, J. L., Heckman, J. J., Leaf, D. E., & Prados, M. J. (2016). The life-cycle benefits of an influential early childhood program (No. w22993). National Bureau of Economic.
Green, F. (2011). What is Skill?: An Inter-Disciplinary Synthesis. Centre for Learning and Life Chances in Knowledge Economies and Societies [Institute of Education, University of London].
Giannakas, K., Tran, K. C., & Tzouvelekas, V. (2003). On the choice of functional form in stochastic frontier modeling. Empirical Economics28(1), 75-100.
Heckman, J. J., Humphries, J. E., & Veramendi, G. (2018). Returns to education: The causal effects of education on earnings, health, and smoking. Journal of Political Economy, 126(S1), S197-S246.
Heckman, J. J., & Corbin, C. O. (2016). Capabilities and skills. Journal of human development and capabilities, 17(3), 342-359.
Heckman, J. J., & Mosso, S. (2014). The economics of human development and social mobility. Annu. Rev. Econ., 6(1), 689-733.
Heckman, J. J., & Kautz, T. (2013). Fostering and measuring skills: Interventions that improve character and cognition (No. w19656). National Bureau of Economic Research.
Heckman, J. J. (2008b). Schools, skills, and synapses. Economic Inquiry, 46(3), 289–324.
Heckman, J. J., Stixrud, J., & Urzua, S. (2006). The effects of cognitive and noncognitive abilities on labor market outcomes and social behavior. Journal of Labor economics24(3), 411-482.
Hanushek, E. A., & Woessmann, L. (2008). The role of cognitive skills in economic development. Journal of economic literature46(3), 607-68.
Kautz, T., Heckman, J. J., Diris, R., Ter Weel, B., & Borghans, L. (2014). Fostering and measuring skills: Improving cognitive and non-cognitive skills to promote lifetime success (No. w20749). National Bureau of Economic Research.
Lundberg, S. (2017). Non-cognitive skills as human capital. Education, Skills, and Technical Change. Implications for Future US GDP Growth.
Meeusen, W., & van den Broeck, J.  (1977). Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error. International Economic Review 18, 435–444.
Pitt, M. M., & Lee, L. F. (1981). The measurement and sources of technical inefficiency in the Indonesian weaving industry. Journal of development economics9(1), 43-64.
Reifschneider, D., & Stevenson, R. (1991). Systematic departures from the frontier: a framework for the analysis of firm inefficiency. International economic review, 715-723.
Santos, M. E., & Alkire, S. (2011). Training material for producing national human development reports. MPI: Construction and analysis. Oxford: Oxford Poverty and Human Development Initiative.
UNDP (United Nations Development Programme). (2010). Human Development Report 2010. The Real Wealth of Nations: Pathways to Human Development. UNDP, New York