Labour-Use Efficiency in Swedish Social Insurance Offices

Subal Kumbhakar and Lennart Hjalmarsson

Journal of Applied Econometrics, 1995, vol. 10, issue 1, 33-47

Abstract: This paper considers the estimation of frontier production functions in panel data models. It proposes a multi-stage method to obtain estimates of (1) the parameters of a flexible input requirement function and (2) technical inefficiency decomposed into time-invariant (firm-specific), time-varying, and the residual components. The proposed method is used to analyze labor-use efficiency of Swedish local social insurance offices on the basis of a large panel of observations during the time period 1974-84. Empirical results show: (1) substantial variations in labor-use efficiency among these offices, with the mean efficiencies declining over time; (2) presence of economies of scale, thereby meaning that most of the offices were of suboptimal size. Copyright 1995 by John Wiley & Sons, Ltd.

Date: 1995
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