Efficiency measurement with unbalanced panel data: Evidence from Tunisian textile, clothing and leather industries

This paper is concerned with the estimation of stochastic frontier producti on functions with unbalanced panel data when unobservable firm efficiency l evels are related to explanatory variables. We use the <<weighted-means>> I nstrumental Variables method acknowledged to R. Gardner (1998) which is a m odification of the Hausman-Taylor (1981) procedure adapted for unbalanced p anel data. The estimation method is used to examine technical efficiency in Tunisian textile, clothing and leather (TCL) industries during the period 1983-1994. Further, we assume a Translog production frontier where input us es are expressed in efficiency units and adjusted for the age of capital an d types of labor. Firm-specific time-invariant technical efficiency is obtained using Schmidt and Sickles (1984) approach. The results suggest that the Instrumental Var iables method produces more accurate estimates of the unknown firm level te chnical efficency. Mean efficency scores resulting from the MHT method is o f 66.5%.