Measurement of Technical Efficiency in Public Education: A Stochastic and Nonstochastic Production Function Approach

Abstract

This paper uses both the stochastic and nonstochastic production function approach to measure technical efficiency in public education in Utah. The stochastic specification estimates technical efficiency assuming half normal and exponential distributions. The nonstochastic specification uses two‐stage data envelopment analysis (DEA) to separate the effects of fixed inputs on the measure of technical efficiency. The empirical analysis shows substantial variation in efficiency among school districts. Although these measures are insensitive to the specific distributional assumptions about the one‐sided component of the error term in the stochastic specification, they are sensitive to the treatment of fixed socioeconomic inputs in the two‐stage DEA.