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The Distribution and Heterogeneity of Technical Efficiency within Industries: An Empirical Assessment

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  • Michael Fritsch
  • Andreas Stephan

Abstract

This paper analyzes the distribution of technical efficiency within manufacturing industries. Using a representative sample of 35,000 firms in 255 industries of the German cost structure census, technical efficiencies are estimated by applying a deterministic frontier production function with firmspecific fixed effects. A new measure is also introduced for characterizing the extent of heterogeneity within an industry that is robust with regard to extreme values of a few small firms. It was found that the level of intra-industry heterogeneity is mainly determined by an industries' average technical efficiency, average firm size, capital intensity and the rate of new firm formation. Most strikingly, we find that in about 95 percent of industries the distribution of technical efficiency is skewed to the right, not to the left as is commonly assumed.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.42663.de/dp453.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 453.

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Length: II, 45 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp453

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Keywords: Technical efficiency; Heterogeneity; Deterministic production function frontier;

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  11. Michael Fritsch & Andreas Stephan, 2006. "Measuring performance heterogeneity within groups - a two-dimensional approach," Applied Economics Letters, Taylor & Francis Journals, vol. 13(1), pages 17-20.
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Cited by:
  1. Bialkowski, Jedrzej & Gottschalk, Katrin & Wisniewski, Tomasz, 2006. "Political orientation of government and stock market returns," MPRA Paper 307, University Library of Munich, Germany, revised Nov 2006.
  2. Roman Kozhan, 2006. "Multiple Priors and No-Transaction Region," Working Papers wp06-24, Warwick Business School, Finance Group.
  3. Fritsch, Michael & Stephan, Andreas, 2004. "What causes cross-industry differences of technical efficiency? An empirical investigation," Freiberg Working Papers 2004,13, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  4. Vigenina, Denotes & Kritikos, Alexander S., 2004. "The individual micro-lending contract: is it a better design than joint-liability?: Evidence from Georgia," Economic Systems, Elsevier, vol. 28(2), pages 155-176, June.
  5. Arnab Bhattacharjee & Eduardo de Castro & (Late) Chris Jensen-Butler, 2007. "Evaluating Economic Theories of Growth and Inequality: A Study of the Danish Economy," CDMA Working Paper Series 200723, Centre for Dynamic Macroeconomic Analysis.
  6. Oleg Badunenko & Michael Fritsch & Andreas Stephan, 2006. "Allocative Efficiency Measurement Revisited: Do We Really Need Input Prices?," Discussion Papers of DIW Berlin 591, DIW Berlin, German Institute for Economic Research.
  7. Arnab Bhattacharjee & Eduardo Castro & Chris Jensen-Butler, 2009. "Regional variation in productivity: a study of the Danish economy," Journal of Productivity Analysis, Springer, vol. 31(3), pages 195-212, June.
  8. Joachim Wagner, 2006. "Politikrelevante Folgerungen aus Analysen mit wirtschaftsstatistischen Einzeldaten der Amtlichen Statistik," Working Paper Series in Economics 16, University of Lüneburg, Institute of Economics.

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