Measurement of technology heterogeneity by metafronter

The gaps between the metafrontier production function and the firm-specific frontier production function is caused mainly by the technology heterogeneity or the difference in technology and production techniques employed by different firms. Different from the routine way to estimate the technology gaps by data envelopment analysis, this study uses the varying coefficients regression model to estimate the metafrontier function, the firm-specific frontier and the technology gaps simultaneously with the reproduced input-output data, which is shown to be an approximate piecewise Cobb-Douglas. The proposed method is then applied in the analysis of panel data on Chinese 33 industries from 2000 to 2003, and the result shows that the difference of technology gaps between industries is quite considerable in China.