A stochastic frontier cost function for residential child care provision

Within a public authority (the firm), there are often several production units. Costs and policy formulation are concerned with the units themselves, though inefficiency might arise at both the firm and unit levels. A stochastic frontier cost function is developed and estimated to describe one such situation where the firms are English local authorities and the production units are homes providing residential care for children. Measures of inefficiency are found for individual authorities.