Efficiency Measurement With Unbalanced Panel Data: Evidence from Tunisian Textile, Clothing and Leather Industries

This paper is concerned with the estimation of stochastic frontier production functions with unbalanced panel data when unobservable firm efficiency levels are related to explanatory variables. We use the «weighted-means» Instrumental Variables method acknowledged to R. Gardner (1998) which is a modification of the Hausman-Taylor (1981) procedure adapted for unbalanced panel 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 uses are expressed in efficiency units and adjusted for the age of capital and types of labor. Firm-specific time-invariant technical efficiency is obtained using Schmidt and Sickles (1984) approach. The results suggest that the Instrumental Variables method produces more accurate estimates of the unknown firm level technical efficency. Mean efficency scores resulting from the MHT method is of 66.5%.