Macroeconomic Reform and Technical Efficiency in Australian Manufacturing - A Stochastic Production Frontier Analysis

The paper reports the empirical results of the validation of the Stochastic Production Frontier (SPF) Model to an unbalanced panel comprising a cross-section of 8 manufacturing industries over a time span of 26 years The results provide insights on the repercussions of the micro-economic reform policy agenda during the study period plagued by a productivity slowdown and the productivity resurgence due to the emergence of the ‘new economy' and now the challenges to sharpen the manufacturing industries competitive edge to combat deindustrializtion threats posed by globalization. The parametric SPF model facilitates the testing of hypotheses relating to the significance of firm-specific and industry-wide inefficiency effects, inequality constraints, and presence of technical change, x-efficiency or heterogeneity effects. Therefore, it is deemed to provide superior testable insights on productivity and technical inefficiency than the rival non-parametric Development (DEA) approach