Examining Technical Efficiency and Productivity of Industries in Western Azerbaijan Using the Parametric and Nonparametric Methods

Nowadays, due to restrictions in production supplements, the best way to improve economic growth is to increase the productivity and efficiency. Firstly, these indexes need to be measured precisely. For more specific policy making and practical policies, it’s necessary to have economic evaluations on national scale, in addition to economic index measurements and analyses on lower scales like local and provincial scales. So this paper is going to make it practical based on final available information by measuring efficiency and productivity of industries in Western Azerbaijan, including top10 groups of industry whose ISIC codes are placed between 15 and 34, from 2002 till 2010. Efficiency and productivity have been calculated by applying two methods; Stochastic Frontier Analysis (SFA) which is a parametric method in econometrics, and the Data Envelopment Analysis (DEA), used as a non-parametric method by means of panel data. Results of analysis indicate that in addition to low productivity in most industry subgroups, their growth is extremely low. Besides, the efficiency change in the mentioned period is along with intensive fluctuations. Furthermore, the research results confirm the fact that ranking based on two studied approaches, SFA and DEA approaches, give approximately the same outcomes.