Comparison of Stochastic Frontier Production Function and Data Envelopment Analysis (DEA) Application in Efficiency Analysis of Tomato Paste Industries

There are different estimation techniques for determining firms' efficiency. Since, each of these techniques has advantages and limitations, it is very important to make a careful choice of method. The primary focus of this study was to investigate the application feasibility of two methods including Stochastic Frontier Production Function (SFP) and Data Envelopment Analysis (DEA) in analyzing the technical efficiency of tomato paste industries in 2008. Fars province was the study area.
SFP application result showed that the distribution of the inefficiency isn't stochastic and efficiency is indeterminable. But by applying DEA technique it was specified by decreasing 61.42% of capital, 36.05% of labor, 42.73% of building area and 57.71% of land area in whole Fars province lower than current condition not only production value will not decrease but also an objective production approximately 1.66% greater than current condition will be obtain. Hereon, DEA was selected as an appropriate approach for efficiency analysis of Tomato paste industries such that in addition to covering the limitations of SPF in efficiency estimation can comminute efficiency in technical, management and scale efficiency. Thus, it led to very important consequences for policy making. In this context, application of this method in current study revealed that technical changes and use of full capacity of Tomato paste industries are important. These cases will be done by the special credit, subside and price supports of Tomato paste producers.

JEL Classification: Q12