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Production Frontiers and Efficiency Measurement

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The Econometrics of Panel Data

Part of the book series: Advanced Studies in Theoretical and Applied Econometrics ((ASTA,volume 33))

Abstract

The standard definition of a production function is that it gives the maximum possible output for a given set of inputs. This is a different concept than the regression function, which gives mean output for a given set of inputs. Thus the production function defines a boundary or “frontier.” Deviations of observed outputs from this frontier are in principle one-sided (non-positive) and can be taken to reflect inefficiency, since they represent failures to achieve maximum possible output given the inputs. Other types of frontiers exist. For example, a cost function gives the minimum possible cost for a given level of output and set of input prices, and defines a frontier from which deviations are in principle non-negative. In this chapter we will concentrate on the estimation of production frontiers and the measurement of technical inefficiency relative to them.

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Authors
  1. Christopher Cornwell
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  2. Peter Schmidt
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Editor information

Editors and Affiliations

  1. Monash University, Melbourne and Budapest University of Economics, Australia

    László Mátyás

  2. ERUDITE, Université de Paris-Val-de-Marne, France

    Patrick Sevestre

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© 1996 Kluwer Academic Publishers

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Cornwell, C., Schmidt, P. (1996). Production Frontiers and Efficiency Measurement. In: Mátyás, L., Sevestre, P. (eds) The Econometrics of Panel Data. Advanced Studies in Theoretical and Applied Econometrics, vol 33. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-0137-7_33

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  • DOI: https://doi.org/10.1007/978-94-009-0137-7_33

  • Publisher Name: Springer, Dordrecht

  • Print ISBN: 978-0-7923-3787-4

  • Online ISBN: 978-94-009-0137-7

  • eBook Packages: Springer Book Archive

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