Essays on estimating efficiency and productivity using stochastic frontier analysis

The purpose of this dissertation is to apply stochastic frontier analysis methodology to the study of efficiency and productivity in industry and in education. It is comprised of three separate studies employing stochastic frontier analysis.;First, stochastic frontier analysis is used to study technical efficiency in Indian industry and its impact on India's recent economic growth. The Indian economy has sustained a consistently high rate of growth since initiating economic reforms in the early 1990's. This encouraging growth episode has the rest of the world watching their economic progress closely. This study examines the role of industrial productivity and efficiency in the post reform Indian economy by using the stochastic frontier production function model over the period 1998 through 2004. We find that industry in India has moved closer to the production frontier and the gap between the states with the highest and lowest technical efficiency in industry has narrowed across time. Most of the growth in industrial output is attributed to total factor productivity. As Indian industry approaches the production frontier, growth will necessarily require further technological innovation and/or increasing input resources.;In the second study, efficiency of public education in Illinois is estimated. Public education in the United States has received a great deal of attention from both constituents and policy makers alike over the past thirty years. Identifying less efficient school districts and examining the sources of inefficiency has important policy implications. School districts might improve efficiency by managing educational resources differently. In this study, we estimate technical efficiency for all three types of school districts in the state of Illinois K-12 public education system. Technical efficiency in the Illinois school system averaged 90% for unit school districts, 85% for elementary school districts, and 82% for high school districts. Possible factors associated with inefficiency in Illinois school districts are also investigated. The percentage of student enrollment that qualifies as low income and the size of the school district are positively related to inefficiency. School districts that have a larger percentage of teachers with advanced degrees are more efficient. Having a lower ratio of students per administrator in a school district increases technical efficiency.;The final study analyzes efficiency among schools within a particular school district. Efficiency of public high schools in the City of Chicago School District is estimated. Technical efficiency of Chicago public high schools averaged 72%. We also investigate possible factors associated with inefficiency. The percentage of student enrollment that is chronically truant, mobility rate, and percentage of nonwhite students are all positively related to inefficiency. Schools with higher parental involvement are more efficient. Larger high schools display greater technical efficiency than smaller high schools.