The Measurement and Comparison of Technical Efficiency Between Public and private Textile Industry in Iran



This paper is concerned with the estimation of frontier production function to measure the technical efficiency for Iranian textile companies during 1995. The objective of this estimation is to investigate if there are any differences in the technical efficiency between the private and public firms as well as the relationship between technical efficiency and size of textile companies in Iran. A Translog stochastic production function is used for this purpose. Maximum Likelihood method is used to estimate parameters of the model and predict technical efficiency for each enterprise. Empirical results show that most of the enterprises are operating at high level of efficiencies. The overall mean efficiency is 84%, indicating that, on average, there exists potential for an increase in output of 16%. Public firms are found to operate more inefficiently than private ones. A negative relationship between number of labor and technical efficency is recognized.