Technical inefficiency in manufacturing industries

Green, Alison and Mayes, David (1991). Technical inefficiency in manufacturing industries. The Economic Journal, 101(406) pp. 523–538.




This article examines technical inefficiency of manufacturing industry in the United Kingdom, based on data for 19,023 establishments in 151 industries. These data, drawn from the Annual Census of Production for 1977, have been used to estimate technical inefficiency in each industry by fitting translog stochastic frontier production functions and decomposing the residuals into two components, one measuring inefficiency and the other unobservable random factors. The work is the first step in a larger project to explain the sources of technical inefficiency, and to compare efficiency between countries. Similar studies are currently taking place in Australia, the United States, Canada, Japan, South Korea and Norway. The first phase of estimation has been completed for the United States (Caves, 1988), for the United Kingdom (Green and Mayes, 1989) and Australia (Harris, 1989).

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