Estimating input-specific technical inefficiency: The case of the Tunisian banking industry

This paper presents an econometric model to estimate input-specific technical efficiency, ISTE, in a panel data framework. It extends the few existing models to estimate ISTE. It can be applied to any flexible functional form and technical inefficiency is firm-specific and time-variant. This model is applied to obtain estimates of technical inefficiency specific to factors of production in the Tunisian banking industry. It is shown that technical efficiency of labor and capital inputs are decreasing over time. Labor input is more inefficiently used than capital input and banks which are relatively more efficient in using capital input are less efficient in using labor input.