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Application of Stochastic Frontier Model in Evaluating the Efficiency of Allowance related Public Safety Nets Programmes in Bangladesh

Corresponding Author : Dr. Md. Zakir Hossain (mzhossain.bds@gmail.com)

Authors : Dr. Md. Zakir Hossain

Keywords : Stochastic production frontier model, Inefficiency effect model, Technical efficiency, Social safety nets programmes

Abstract :

The stochastic frontier model is usually used in estimating the technical efficiency of production of firms. Several social safety nets programmes in Bangladesh are working to protect individuals living in vulnerable conditions. Using the primary data of 130 rural clusters covering 620 households for old age people, 327 for widows and 173 households for disables, this study attempts to apply the stochastic frontier model to evaluate the efficiency of three main allowance related public safety nets programmes considering two outcome variables, viz. food expenditure and healthcare expenditure. The unconstrained trans-log production function was found perfect frontier model to evaluate the efficiency for both old age allowance and allowances for the widowed for both the outcome variables. In addition, Cobb-Douglas production function was appeared as ideal frontier model for allowances for disables for both of the outcome variables. In addition, technical inefficiency effect model is found essential for evaluating the performance efficiency for most of the cases. The mean technical efficiency for old age allowance, allowances for the widowed and allowances for disables were estimated at 71.96%, 81.18% and 79.35% respectively for the outcome variable food expenditure, while the mean technical efficiency were estimated at 40.39%, 39.82% and 38.29%, respectively for the outcome variable healthcare expenditure. The findings of the study might be helpful for better design and implementation of the allowance related public safety nets programmes of Bangladesh since it explored the efficiency level and inefficiency determinants of the programmes.

Published on June 30th, 2019 in Volume 29, Issue 1, Physical Sciences