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Estimating Technical Inefficiency: An Empirical Approach To Eu Industries

Author

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  • Aikaterini Kokkinou

    (Department of Economics, University of Glasgow)

Abstract

This paper estimates, incorporating a Transcendental Logarithmic Production Function, the technical efficiency level of different industries in selected E.U. countries. The paper considers panel data for inefficiency effects in stochastic production frontier based on Battese and Coelli (1995), providing translog effects, as well as industry effects. The empirical model accommodates not only heteroscedasticity but also allows the possibility that an industry may not always produce the maximum possible output, given the inputs. Unlike most studies, the paper estimates time – varying technical efficiencies (incorporating „learning – by doing? behaviour) as industry-specific fixed effects. Furthermore, the model decomposes total factor productivity (TFP) growth into two components: technological growth (essentially, a shift of production possibility frontier, set by best-practice enterprises) and inefficiency changes (i.e., deviations of actual output level from the production possibility frontier).

Suggested Citation

  • Aikaterini Kokkinou, 2010. "Estimating Technical Inefficiency: An Empirical Approach To Eu Industries," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 95-104, December.
    • Handle: RePEc:hrs:journl:v:ii:y:2010:i:2:p:95-104
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    More about this item

    Keywords

    Efficiency; Technical Inefficiency; Stochastic Frontier Model;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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