“Efficiency Flooding”: Black-Box Frontiers and Policy Implications

This research aims to comtribute to the discussion on the importance of theoretically consistent modelling for stochastic efficiency analysis. The robustness of policy suggestions based on inferences from efficiency measures crucially depends on theoretically well-founded estimates. The theoretical consistency of recently published technical efficiency estimates for different sectors and countries is critically reviewed. The results confirm the need for a posteriori checking the regularity of the estimated frontier by the researcher and, if necessary, the a priori imposition of the theoretical requirements.