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Drivers of regional efficiency differentials in Italy: technical inefficiency or allocative distortions?

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Author Info
Fabrizio Erbetta () (University of Piemonte Orientale, Faculty of Economics / HERMES, Higher Education and Research on Mobility and the Economics of Public Services / CERIS-CNR, Institute for Economic Research on Firms and Growth)
Petraglia Carmelo () (University of Napoli "Federico II", Department of Economics)

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Abstract

This paper estimates regional economic efficiency differentials at the firm level in the Italian manufacturing sector over the period 1998-2003. We implement an input distance function approach providing measures of both technical inefficiency and allocative distortions in the choice of input mixes. Our results confirm the substantial technical efficiency gap suffered by firms located in Southern regions, thus providing empirical support to the “structural and technological gap” interpretation of the Italian dualism. On the other hand, allocative distortions in the use of inputs show less remarkable regional differences. As for policy implications, our results suggest the need for a re-allocation of public resources for development policies from business incentives measures towards public investments.

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Publisher Info
Paper provided by Institute for Economic Research on Firms and Growth - Moncalieri (TO) in its series CERIS Working Paper with number 200802.

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Length: 22 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:csc:cerisp:200802

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Related research
Keywords: Technical and allocative efficiency; Input distance function; Development policies;

Find related papers by JEL classification:
C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Statistical Decision Theory; Operations Research
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
R0 - Urban, Rural, and Regional Economics - - General

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  1. Kumbhakar, Subal C. & Wang, Hung-Jen, 2006. "Estimation of technical and allocative inefficiency: A primal system approach," Journal of Econometrics, Elsevier, vol. 134(2), pages 419-440, October. [Downloadable!] (restricted)
  2. Rodriguez-Alvarez, Ana & Fernandez-Blanco, Victor & Lovell, C. A. Knox, 2004. "Allocative inefficiency and its cost:: The case of Spanish public hospitals," International Journal of Production Economics, Elsevier, vol. 92(2), pages 99-111, November. [Downloadable!] (restricted)
  3. Fare, Rolf & Grosskopf, Shawna, 1990. "A distance function approach to price efficiency," Journal of Public Economics, Elsevier, vol. 43(1), pages 123-126, October. [Downloadable!] (restricted)
  4. Bauer, Paul W., 1990. "Recent developments in the econometric estimation of frontiers," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 39-56. [Downloadable!] (restricted)
  5. Kumbhakar, Subal C. & Tsionas, Efthymios G., 2005. "Measuring technical and allocative inefficiency in the translog cost system: a Bayesian approach," Journal of Econometrics, Elsevier, vol. 126(2), pages 355-384, June. [Downloadable!] (restricted)
  6. Coelli, Tim & Perelman, Sergio, 2000. "Technical Efficiency of European Railways: A Distance Function Approach," Applied Economics, Taylor and Francis Journals, vol. 32(15), pages 1967-76, December. [Downloadable!] (restricted)
  7. Greene, William H., 1980. "Maximum likelihood estimation of econometric frontier functions," Journal of Econometrics, Elsevier, vol. 13(1), pages 27-56, May. [Downloadable!] (restricted)
  8. Schmidt, Peter & Knox Lovell, C. A., 1979. "Estimating technical and allocative inefficiency relative to stochastic production and cost frontiers," Journal of Econometrics, Elsevier, vol. 9(3), pages 343-366, February. [Downloadable!] (restricted)
  9. Richard I. D. Harris, 2001. "Comparing Regional Technical Efficiency in UK Manufacturing Plants: The Case of Northern Ireland 1974--1995," Regional Studies, Taylor and Francis Journals, vol. 35(6), pages 519-534, August. [Downloadable!] (restricted)
  10. Piergiuseppe Morone & Carmelo Petraglia & Giuseppina Testa, 2007. "Research, Knowledge Spillovers and Innovation," Birkbeck Working Papers in Economics and Finance 0713, Birkbeck, Department of Economics, Mathematics & Statistics. [Downloadable!]
  11. Ana Rodríguez-Álvarez & C. A. Knox Lovell, 2004. "Excess capacity and expense preference behaviour in National Health Systems: an application to the Spanish public hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 157-169. [Downloadable!]
  12. Nickell, Stephen & Nicolitsas, Daphne, 1999. "How does financial pressure affect firms?," European Economic Review, Elsevier, vol. 43(8), pages 1435-1456, August. [Downloadable!] (restricted)
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  13. Fare, R & Primont, D, 1995. "On Inverse Homotheticity," Bulletin of Economic Research, Blackwell Publishing, vol. 47(2), pages 161-66, April.
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