Measuring Technical Efficiency: A Comparison of Alternative Methodologies with Census Data

Following Farrell’s pioneering work [1957], the development and refinements of the economic and statistical foundations of production and cost frontiers have progressed rapidly in recent years. Some of the more recent developments, in particular the formulation of stochastic (or composed error) frontiers, attempt to recognize that the measurement of technical and allocative efficiency is fraught with difficulties: (a) the firm operates in a world where its performance is likely to be affected by events outside its control; (b) the of white-collar workers within a given establishment. To minimize the possibility of measurement error, the minimum wage rate of the whole industrial sector is computed as the simple average of the ten lowest wage rates of blue-collar workers observed in the census