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Estimation of stochastic cost frontier models: The case of Nebraska school districts
Abstract
In this dissertation stochastic cost frontiers, their application, and results of estimation for K-12 Nebraska school districts have been described. The two-equation cost frontier model, where explicit modeling of cost inefficiency has been incorporated, appears to be superior to the one-equation cost frontier model. The results of estimation indicate that inefficiency exists among school districts. As a result, the standard ordinary least squares (OLS) estimation procedure is not appropriate. Moreover, evidence of non-neutral shifting of the cost frontier with respect to the interaction between teachers' experience and scale of operation further corroborates that OLS cannot even indicate the shape of the cost frontier. It is found that scale of operation, graduation rate, teacher's salary and a measure of special-need students are important determinants of cost structure. In explaining inefficiency, the interactive variable has explanatory power. In addition, efficiency estimates for individual school districts, estimated on the basis of the corresponding cost frontiers, have been used to make a ranking of the 274 school districts analyzed. With this model, an approach has been explained which can be employed to improve the cost indices used in the formulation of typical state aid formulae to address fiscal disparities among school districts. It has been further demonstrated that the composite error term used in the frontier model provides extra information about the operation of school districts which can be put to use for improving state aid formula. Incorporation of a time variable in the cost function as well as in the inefficiency model has also made it possible to observe that there has been a technological regression over the period of analysis from 1989-90 to 1991-92. However, Nebraska school districts appear to have been successful in terms of enhancing cost efficiency over the study period. Thus, this dissertation documents the potential of cost frontiers to deliver better insight about the educational cast structure and to contribute more effectively in the effort to minimize fiscal disparities among Nebraska school districts.
Subject Area
Economics|School finance
Recommended Citation
Kabir, Mahbubul MD., "Estimation of stochastic cost frontier models: The case of Nebraska school districts" (1998). ETD collection for University of Nebraska-Lincoln. AAI9903772.
https://digitalcommons.unl.edu/dissertations/AAI9903772