Technical Inefficiency and Public Capital in U.S. States: A Stochastic Frontier Approach

Univ. Pompeu Fabra, Economics and Business Working Paper No. 451

35 Pages Posted: 22 Jun 2000

See all articles by Jaume Puig-Junoy

Jaume Puig-Junoy

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

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Abstract

This paper estimates a translog stochastic frontier production function in the analysis of all 48 contiguous U.S. states in the period 1970-1983, to attempt to measure and explain changes in technical efficiency. The model allows technical inefficiency to vary over time, and inefficiency effects to be a function of a set of explanatory variables in which the level and composition of public capital plays an important role. Results indicated that U.S. state inefficiency levels were significantly and positively correlated with the ratio of public capital to private capital. The proportion of public capital devoted to highways is negatively correlated with technical inefficiency, suggesting that not only the level but also the composition of public capital influenced state efficiency.

JEL Classification: C23

Suggested Citation

Puig-Junoy, Jaume, Technical Inefficiency and Public Capital in U.S. States: A Stochastic Frontier Approach. Univ. Pompeu Fabra, Economics and Business Working Paper No. 451, Available at SSRN: https://ssrn.com/abstract=224591 or http://dx.doi.org/10.2139/ssrn.224591

Jaume Puig-Junoy (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

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