| By: |
Anne-Kathrin Last (Institute of Economics, University of Lüneburg);
Heike Wetzel (Institute of Economics, University of Lüneburg) |
| Abstract: |
In recent years the economic performance of public non-profit sectors such as
cultural services has become an interesting economic issue. This is due to the
high dependence of cultural institutions on public funding on the one hand and
the increasing cost-pressure on public budgets on the other hand. In order to
achieve an efficiently, cost-minimizing resource allocation public authorities
who decide on the distribution of public budgets need reliable performance
indicators. Against this background, this paper analyzes the efficiency of
German public theaters for the seasons 1991/1992 to 2005/2006. Using a
stochastic frontier analysis approach, we test whether the assumption of
cost-minimizing behavior is reliable in this sector. Moreover, several panel
data models that differ in their ability to account for unobserved
heterogeneity are applied to evaluate the impact of unobserved heterogeneity
on the efficiency estimates. The results indicate that the cost-minimizing
assumption cannot be maintained. Consequently, an efficiency analysis based on
a cost function approach seems inappropriate in the case of German public
theaters. Further, we find a considerably unobserved heterogeneity across the
theaters, which causes a significant variation in the models’ efficiency
estimates. This implies that failing to account for unobserved heterogeneity
leads to biased efficiency values. Overall, our results suggest that there is
still space for improvement in the employment of resources in the sector. |
| Keywords: |
Public theaters, efficiency, stochastic frontier analysis, input distance function, cultural economics |
| JEL: |
L82 D24 Z10 |
| Date: |
2009–07 |
| URL: |
http://d.repec.org/n?u=RePEc:lue:wpaper:134&r=cul |