ECONOMETRIC EFFICIENCY ANALYSIS - A POLICY-ORIENTED REVIEW

The econometric approach to the construction of production, cost and o ther frontiers, and the measurement of efficiency relative to these fr ontiers, historically has had a strong policy orientation. This distin guishes the approach from the mathematical programming approach, which has had a managerial decision-making orientation geared to solving al location problems within the public or private organization. In this p aper I review the development of the econometric approach to efficienc y analysis. I then discuss a small number of empirical studies chosen to illustrate the application of the econometric approach to a collect ion of public policy issues for which the notion of efficiency measure ment is of prime importance. Examples are drawn from the areas of (1) agricultural productivity, (2) labor market efficiency and equity, (3) the measurement of the standard of living, (4) the establishment of q uality of service standards, and (5) the valuation of environmental di samenities.