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The efficiency of German public theaters: a stochastic frontier analysis approach

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  • Anne-Kathrin Last

    ()

  • Heike Wetzel

    ()

Abstract

In recent years the economic performance of public non-profit sectors such as cultural services has become an interesting economic issue. This is due to the high dependence of cultural institutions on public funding on the one hand and the increasing cost-pressure on public budgets on the other hand. In order to achieve an efficiently, cost-minimizing resource allocation public authorities who decide on the distribution of public budgets need reliable performance indicators. Against this background, this paper analyzes the efficiency of German public theaters for the seasons 1991/1992 to 2005/2006. Using a stochastic frontier analysis approach, we test whether the assumption of cost-minimizing behavior is reliable in this sector. Moreover, several panel data models that differ in their ability to account for unobserved heterogeneity are applied to evaluate the impact of unobserved heterogeneity on the efficiency estimates. The results indicate that the cost-minimizing assumption cannot be maintained. Consequently, an efficiency analysis based on a cost function approach seems inappropriate in the case of German public theaters. Further, we find a considerably unobserved heterogeneity across the theaters, which causes a significant variation in the models’ efficiency estimates. This implies that failing to account for unobserved heterogeneity leads to biased efficiency values. Overall, our results suggest that there is still space for improvement in the employment of resources in the sector.

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File URL: http://hdl.handle.net/10.1007/s10824-009-9111-5
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Bibliographic Info

Article provided by Springer in its journal Journal of Cultural Economics.

Volume (Year): 34 (2010)
Issue (Month): 2 (May)
Pages: 89-110

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Handle: RePEc:kap:jculte:v:34:y:2010:i:2:p:89-110

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Web page: http://www.springerlink.com/link.asp?id=100284

Related research

Keywords: Public theaters; Efficiency; Stochastic frontier analysis; Input distance function; Cultural economics; L82; D24; Z10;

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References

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Cited by:
  1. Wagner, Joachim, 2009. "The Research Potential of New Types of Enterprise Data Based on Surveys from Official Statistics in Germany," IZA Discussion Papers 4364, Institute for the Study of Labor (IZA).
  2. Anne-Kathrin Last & Heike Wetzel, 2011. "Baumol’s cost disease, efficiency, and productivity in the performing arts: an analysis of german public theaters," Journal of Cultural Economics, Springer, vol. 35(3), pages 185-201, August.
  3. Luis César Herrero-Prieto, 2009. "Is Museum Performance Affected By Location And Institution Type? Measuring Cultural Institution Efficiency Through Non-Parametric Techniques," The Institute for International Integration Studies Discussion Paper Series iiisdp425, IIIS.

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