Eco-efficiency under weak and strong sustainability: a cross-country stochastic frontier analysis

The climate and ecological crises call for a development that remains within global ecological boundaries. This paper employs a panel stochastic frontier approach to assess the eco-efficiency of 158 countries from 2000 to 2019 in converting produced, human, and natural capital into sustainability-adjusted welfare and incorporating institutional quality as a key driver of eco-efficiency. We estimate global production frontiers under both weak and strong sustainability assumptions, allowing for different degrees of substitution among capital inputs. Three findings stand out. First, under strong sustainability, high-income economies lose up to 0.42 efficiency points on a 0–1 scale relative to the frontier, while low-income economies gain 0.23 points, indicating global convergence. Second, material use is the strongest drag on sustainability-adjusted welfare gains: its efficiency elasticity is −0.015, nearly double that observed when ecological thresholds are weak. Third, a 0.1-point improvement in governance accountability increases eco-efficiency by 3% when natural-capital constraints tighten.