Inefficiency in Childcare Production: Evidence from Italian Microdata

Abstract

The purpose of the paper is to study inefficiency in the production technology of the childcare service and to carry out a comparative analysis of public and private day-care centres. An empirical analysis on cross-section micro-data from a region of northern Italy has been conducted by using an input-distance function with a translog specification. Estimates of the multi-output production technology and input-oriented technical inefficiency are obtained in a stochastic frontier model with a half-normally distributed one-sided error. Heteroscedasticity has been modelled to investigate the determinants of inefficiency and estimate their marginal effects. We find that production exhibits increasing returns with an estimated elasticity of scale of 1.21. Separability between inputs and outputs is rejected at a 5% level of significance. The average estimate of technical inefficiency is 10% and public centres are more inefficient than private centres by 4.1 percentage points. The proportion of part-time children and the presence of mixed-age classrooms are significant determinants of inefficiency which equally affect both public and private centres.