The Distribution and Heterogeneity of Technical Efficiency within Industries: An Empirical Assessment

Michael Fritsch () and Andreas Stephan

No 453, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper analyzes the distribution of technical efficiency within manufacturing industries. Using a representative sample of 35,000 firms in 255 industries of the German cost structure census, technical efficiencies are estimated by applying a deterministic frontier production function with firmspecific fixed effects. A new measure is also introduced for characterizing the extent of heterogeneity within an industry that is robust with regard to extreme values of a few small firms. It was found that the level of intra-industry heterogeneity is mainly determined by an industries' average technical efficiency, average firm size, capital intensity and the rate of new firm formation. Most strikingly, we find that in about 95 percent of industries the distribution of technical efficiency is skewed to the right, not to the left as is commonly assumed.

Keywords: Technical efficiency; Heterogeneity; Deterministic production function frontier (search for similar items in EconPapers)
JEL-codes: D31 I21 J62 (search for similar items in EconPapers)
Pages: II, 45 p.
Date: 2004
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: The distribution and heterogeneity of technical efficiency within industries: An empirical assessment (2004)
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