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The efficiency of German public theaters: a stochastic frontier analysis approach

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  • Anne-Kathrin Last
  • Heike Wetzel

Abstract

In recent years the economic performance of public non-profit sectors such as cultural services has become an interesting economic issue. This is due to the high dependence of cultural institutions on public funding on the one hand and the increasing cost-pressure on public budgets on the other hand. In order to achieve an efficiently, cost-minimizing resource allocation public authorities who decide on the distribution of public budgets need reliable performance indicators. Against this background, this paper analyzes the efficiency of German public theaters for the seasons 1991/1992 to 2005/2006. Using a stochastic frontier analysis approach, we test whether the assumption of cost-minimizing behavior is reliable in this sector. Moreover, several panel data models that differ in their ability to account for unobserved heterogeneity are applied to evaluate the impact of unobserved heterogeneity on the efficiency estimates. The results indicate that the cost-minimizing assumption cannot be maintained. Consequently, an efficiency analysis based on a cost function approach seems inappropriate in the case of German public theaters. Further, we find a considerably unobserved heterogeneity across the theaters, which causes a significant variation in the models’ efficiency estimates. This implies that failing to account for unobserved heterogeneity leads to biased efficiency values. Overall, our results suggest that there is still space for improvement in the employment of resources in the sector.
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  • Anne-Kathrin Last & Heike Wetzel, 2010. "The efficiency of German public theaters: a stochastic frontier analysis approach," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 34(2), pages 89-110, May.
  • Handle: RePEc:kap:jculte:v:34:y:2010:i:2:p:89-110
    DOI: 10.1007/s10824-009-9111-5
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    Cited by:

    1. Giannis Karagiannis & Magnus Kellermann, 2019. "Stochastic frontier models with correlated effects," Journal of Productivity Analysis, Springer, vol. 51(2), pages 175-187, June.
    2. Víctor Fernández-Blanco & Ana Rodríguez-Álvarez & Aleksandra Wiśniewska, 2019. "Measuring technical efficiency and marginal costs in the performing arts: the case of the municipal theatres of Warsaw," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 43(1), pages 97-119, March.
    3. Victor Fernandez-Blanco & Ana Rodriguez-Alvarez, 2015. "Measuring allocative efficiency in cultural economics: The case of Fundacion Princesa de Asturias," ACEI Working Paper Series AWP-09-2015, Association for Cultural Economics International, revised Oct 2015.
    4. Marta Zieba, 2011. "An Analysis of Technical Efficiency and Efficiency Factors for Austrian and Swiss Non-Profit Theatres," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(II), pages 233-274, June.
    5. Sabrina Auci & Laura Castellucci & Manuela Coromaldi, 2021. "How does public spending affect technical efficiency? Some evidence from 15 European countries," Bulletin of Economic Research, Wiley Blackwell, vol. 73(1), pages 108-130, January.
    6. Achten-Gozdowski, Jennifer, 2018. "Geschichte und Politökonomie deutscher Theatersubventionen [History and Political Economy of Public Subsidies for German Theatres and Operas]," MPRA Paper 85087, University Library of Munich, Germany.
    7. Joachim Wagner, 2010. "The Research Potential of New Types of Enterprise Data based on Surveys from Official Statistics in Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(1), pages 133-142.
    8. Kristiaan Kerstens & Jafar Sadeghi & Ignace Van de Woestyne & Linjia Zhang, 2022. "Malmquist productivity indices and plant capacity utilisation: new proposals and empirical application," Annals of Operations Research, Springer, vol. 315(1), pages 221-250, August.
    9. Castiglione, Concetta & Infante, Davide & Zieba, Marta, 2023. "Public support for performing arts. Efficiency and productivity gains in eleven European countries," Socio-Economic Planning Sciences, Elsevier, vol. 85(C).
    10. Anne-Kathrin Last & Heike Wetzel, 2011. "Baumol’s cost disease, efficiency, and productivity in the performing arts: an analysis of german public theaters," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 35(3), pages 185-201, August.
    11. Víctor Fernández-Blanco & Ana Rodríguez-Álvarez, 2018. "Measuring allocative efficiency in Cultural Economics: the case of “Fundación Princesa de Asturias” (The Princess of Asturias Foundation)," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 42(1), pages 91-110, February.
    12. Marta Zieba & Carol Newman, 2012. "Organisational Structure and Managerial Efficiency: A quasi-experimental analysis of German public theatres," Working Papers WP032012, University of Limerick, Department of Economics, revised Oct 2012.
    13. Luis César Herrero-Prieto & Mafalda Gómez-Vega, 2017. "Cultural resources as a factor in cultural tourism attraction," Tourism Economics, , vol. 23(2), pages 260-280, March.
    14. Amy Whitaker, 2021. "Economies of scope in artists’ incubator projects," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 45(4), pages 613-631, December.
    15. Víctor Fernández-Blanco & Luis César Herrero & Juan Prieto-Rodríguez, 2013. "Performance of cultural heritage institutions," Chapters, in: Ilde Rizzo & Anna Mignosa (ed.), Handbook on the Economics of Cultural Heritage, chapter 24, pages i-i, Edward Elgar Publishing.
    16. Briec, Walter & Kerstens, Kristiaan & Prior, Diego & Van de Woestyne, Ignace, 2018. "Testing general and special Färe-Primont indices: A proposal for public and private sector synthetic indices of European regional expenditures and tourism," European Journal of Operational Research, Elsevier, vol. 271(2), pages 756-768.
    17. Luis César Herrero-Prieto, 2013. "Is Museum Performance Affected By Location And Institution Type? Measuring Cultural Institution Efficiency Through Non-Parametric Techniques," The Institute for International Integration Studies Discussion Paper Series iiisdp425, IIIS.
    18. Marta Zieba, 2013. "Is theatre efficiency affected by the legal form type? A case study of German public theatres," Working Papers WP032013, University of Limerick, Department of Economics, revised Jul 2013.
    19. Castiglione, Concetta & Infante, Davide & Zieba, Marta, 2024. "Is it worth subsidising the cultural sector? New insights from Italian theatre companies," Journal of Policy Modeling, Elsevier, vol. 46(1), pages 20-38.
    20. Michael Danquah and Bazoumana Ouattara, 2018. "Comparison of Stochastic Frontier Approaches for Estimating National Efficiency: An Application to Sub-Saharan African Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 43(3), pages 119-142, September.
    21. Maria Jose Del Barrio-Tellado & Luis Cesar Herrero-Prieto, 2018. "Supporting the Dance Sector. Does Efficiency Clash with Success When Programming?," ACEI Working Paper Series AWP-03-2018, Association for Cultural Economics International, revised Jul 2018.
    22. Concetta Castiglione & Davide Infante & Marta Zieba, 2018. "Technical efficiency in the Italian performing arts companies," Small Business Economics, Springer, vol. 51(3), pages 609-638, October.
    23. Gómez Vega, Mafalda & Herrero Prieto, Luis César, 2017. "Determinantes de la eficiencia en la captación de turismo cultural nacional y extranjero en España: Un análisis regional/Drivers of Efficiency in Attracting Domestic and Foreign Cultural Tourism to Sp," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 35, pages 849-872, Agosto.
    24. Malgorzata Galecka & Katarzyna Smolny, 2021. "Productivity of Public Theatres in the Times of COVID-19: The Example of Polish Theatres," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 3), pages 667-678.

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    More about this item

    Keywords

    Public theaters; Efficiency; Stochastic frontier analysis; Input distance function; Cultural economics; L82; D24; Z10;
    All these keywords.

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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