Sources of Technical Efficiency: The Roles of Modernization and Information

Abstract

Leibenstein has suggested that losses from Xor technical inefficiency may be far more important than losses from allocative inefficiency., Several recent studies have attempted to measure the magnitude of these former losses, while Timmer and Miiller2 have noted that invocation of the term "technical efficiency" may imply an admission of the analyst's incomplete understanding of the production process. Improved specification of the model may relate interfirm productivity variability to input variability, rather than to the somewhat enigmatic technical efficiency. This improved specification may be extremely helpful to policymakers in developing nations, where the list of proposed programs often includes many that aim at improving management. For example, in the area of agricultural development there are frequent proposals related to extension services, farmer training centers, model farmer programs, best-farmer awards, field days, mass-media programs, and the like. The specific content of such programs may vary considerably: teaching specific farm skills, teaching general skills such as literacy and arithmetic, exhorting farmers to work harder, stimulating demand for cash goods, and attempting to develop a generally more modern, change-oriented outlook. If policymakers know why some farmers are better managers (i.e., why there are technical efficiency differentials), they might have firmer grounds for