While most of the available literature in this area has employed the least-squares method to examine the relationship between FDI and economic growth, our study employs a stochastic frontier links of London jewellery links of london approach. This approach allows us to distinguish the effects of FDI on economic growth via technical and efficiency change and quantify the effects of FDI, along with other variables, on efficiency levels. Only a limited number of macroeconomic empirical studies using the stochastic frontier have been undertaken. For example, Iyer et al. (2004) used this approach to examine the spillover effects of FDI inflows for 20 OECD links of London stores. Nourzad (2008) employed a stochastic translog links of London jewellery frontier to estimate technical inefficiency indices whose conditional mean is specified as a links of London of FDI and its interaction with openness in the economy. In the same vein, we chose the stochastic frontier approach to examine whether FDI inflows enhance economic growth via efficiency gains and to estimate technical efficiency for the links of london charms stores selected. In essence, the stochastic frontier method constructs an efficient frontier by imposing the same technology across all links of London stores in the sample. Deviations from the frontier are divided into inefficiency and noise components. We make use of Battese and Coelli (1993, 1995) in accordance with the original models of Aigner, Lovell and Schmidt (1977) and Meeusen and van den Broeck (1977).
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