X-Inefficiency in the Public Sector: the Case of Libraries

Abstract

A short-run total cost function is fitted to 1992 data for 235 public libraries in New York state. The stochastic frontier model is employed, which decomposes the error term into a random variable for statistical noise and a residual component measur ing economic inefficiency. Mean X-inefficiency (cost inefficiency) is estimated to be 24%. Government-run public libraries are about 3% more inefficient than private not-for-profit public libraries. Funding sources also influence efficiency: The greater the proportion of funds derivedfrom local taxation and from gifts, the more efficient the library.