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"A large, poor country growing quickly will soon approach the productivity frontier".
Paul Collier of Oxford University says Africa needs them too: "African peasant farming has fallen further and further behind the advancing commercial productivity frontier".But alas, the record of large farms in Africa has been poor.
When Wal-Mart linked IT with its efficient distribution network, it advanced both the state of the art in supply chain management and the productivity frontier of its sector.
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Farrell [1] seemed to be the first author who devoted his work to the study of the production frontier for evaluating productivity.
Shao and Lin (2016) evaluated the performance of IT service industries of Organization of Economic Cooperation and Development (OECD) countries by using Malmquist Productivity Index (MPI) as a metric and Stochastic Production Frontier (SPF) as an approach and an annual rate of 7.4% growth in productivity in IT service industries was observed.
It was not surprising that the observations on the production frontier were those from recent years because productivity has generally increased over time.
Technical efficiency is defined as the production of the maximum amount of output from a given amount of input so that the service operates at the production frontier i.e. optimal level of productivity.
Stochastic production frontier.
If a production frontier shifts outwards too far for some health centers to catch up, health centers may show a lower efficiency score but actually have higher productivity than the earlier year.
Since Farrell's (1957) seminal paper, two main approaches have been proposed for calculating efficiency and productivity: stochastic frontier analysis (SFA) and data envelopment analysis (DEA).
According to Kumbhakar [9], the decomposition of TFP is related to six concepts: total factor productivity (TFP), frontier technical progress (FTP), technical efficiency (TE), change rate of TE, allocative Efficiency (AE) and scale economy (SE).
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com