Technical Efficiency of Australian Wool Production: Point and Confidence Interval Estimates

Abstract

A balanced panel of data is used to estimate technical efficiency, employing a fixed-effects stochastic frontier specification for wool producers in Australia. Both point estimates and confidence intervals for technical efficiency are reported. The confidence intervals are constructed using the Multiple Comparisons with the Best (MCB) procedure of Horrace and Schmidt (2000). The confidence intervals make explicit the precision of the technical efficiency estimates and underscore the dangers of drawing inferences based solely on point estimates. Additionally, they allow identification of wool producers that are statistically efficient and those that are statistically inefficient. The data reveal at the 95% confidence level that twenty-one of the twenty-six wool farms analyzed may be efficient.Wool, Technical Efficiency, MCB, MCC