Planning and Budgeting

Investigating the efficiency of different economic sectors, especially the industrial sector, as well as the factors affecting the efficiency of this sector is one of the most important economic issues. Various methods are used to measure the technical efficiency, and the stochastic frontier production function analysis is one of them. In this method, by using econometric techniques, the efficiency border is estimated, with which the firm’s performance is compared. In this paper, by using data of the firms with 50 employees and more, for the period from 1994-ا2011, the frontier production function has been estimated and the technical efficiency for each province has been identified. In addition, the effect of governmental management and ownership, as well as the number of active firms have been examined as three environmental variables influencing the inefficiency of these industries in the provinces of Iran. Thus, a comparative outline is sketched with regard to technical efficiency and factors affecting inefficiency in the country. The results showed that the average technical efficiency is estimated at 79.56%, while Tehran has the highest and Kohgiloyeh Boirahmad has the lowest average technical efficiency. The governmental ownership factor and number of firms have a positive effect, whereas the governmental management has a negative effect on technical efficiency in these industries.