Efficiency and Productivity Analysis: Two Empirical Applications and a Methodological Contribution

In this thesis some tools from the literature in eÿciency and productivity analysis are relied upon to assess the economic performance of two sectors: the Danish state-recognised museums and the urban public transport systems of some Latin American cities. These sectors are regulated and partly funded by the state, hence these analyses are important not only from an academic perspective but also in terms of their policy implications. The thesis comprises an introductory chapter, three separate papers and a concluding chapter. The first paper analyses with stochastic frontier models the influence public funding may have on the technical eÿciency of museums, considering the multiple cultural and educational services delivered by these organisations. Consistency with microeconomic theory is ensured by imposing monotonicity conditions, something that hasn’t been done before in an input-oriented setting, which this model employs. The second paper (co-authored with Arne Henningsen) develops an input-oriented stochastic ray function, which is suitable for the analysis with logarithmic functions of sectors where control over inputs is greater than that over outputs and where some productive entities do not produce the entire set of outputs, a problem that is pervasive in various economic sectors. We also address a critique the ray function has been subject to, namely that it might be sensitive to the ordering of outputs, and demonstrate how to impose monotonicity conditions to its input-oriented version. We test the methodology with the same database as that of the first paper. The third paper (co-authored with Andrés Gómez-Lobo) examines the empirical validity of the Baumol Cost Disease theory in the transport sector. This theory, originally proposed in the field of cultural economics, states that whenever labour productivity is stagnant, labour-saving technical change is rather absent and labour markets are integrated, costs increase in relation to those of the general economy, which in the case of transit systems generates significant fiscal pressures. The paper tests this proposition, as well as possible (partial) solutions to the problem, using data for two less-developed countries, contributing to a body of literature that, besides being scarce, has focused only on developed countries.