The impact on technical efficiency of the UK privatization programme

Abstract

The level of technical efficiency in nine organizations privatized in the UK in the 1980s is assessed. Technical efficiency is measured for a number of years before and after privatization using data envelopment analysis. This non-parametric method allows efficiency to be measured without having to specify either the form of the production function or the weights for the different inputs and outputs used. Nevertheless, inputs and outputs have to be specified and some assumption has to be made about production conditions. Consequently, three models are estimated: the first assumes constant returns to scale; the second allows for variable returns; and the third adds environmental variables for technological change and the business cycle to the input/output set. The nine organizations studied yield mixed results. In some cases there is clear evidence of an improvement in technical efficiency; in others there is no discernible impact of ownership on performance.