Abstract

This paper reviews and contrasts the results from different approaches to the measurement of technical efficiency. The measurement of efficiency is based on the estimation of production function frontiers. The alternatives considered include full frontiers and stochastic frontiers under different assumptions about the error structure. The comparison is carried out on the 1967 Chilean manufacturing census. The few previous attempts that have compared alternative approaches were based on extremely narrow data sets. The results for 43 4-digit International Standard Industrial Classification (ISIC) sectors indicate that the measurement of sector efficiency is sensitive to the selection between statistical and stochastic frontiers but not to the choice of error structure. Measures for establishment-level efficiency estimates within a sector correlate highly, and about half of the sectors considered could not support the estimation of a stochastic frontier. It appears that error structures in the literature are not appropriate or the purged data might still include observations with measurement errors.

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