Economics and Finance Faculty Publications and Presentations

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This paper focuses on the estimation of efficiency within the medical laboratories industry, a sector of vital importance in healthcare due to its provision of essential diagnostic services. To this end, we employ three distinct stochastic frontier models to evaluate the technical efficiency of the medical laboratory industry. Our benchmark model stands out by considering the presence of heterogeneity, leading to robust findings compared to alternative models. The mean efficiency estimate is determined to be 70.6%, while the median efficiency estimate stands at 70.0%. Remarkably, our results highlight that the production technology employed in US medical laboratories demonstrates constant returns to scale. Moreover, our study delves into the intricate relationship between firm efficiency and market valuation. Our findings reveal a positive and statistically significant correlation between efficiency and market valuation. More specifically, a 1% increase in efficiency corresponds to a 1.08% increase in market valuation.


This is an Accepted Manuscript of an article published by Taylor & Francis in Applied Economics on 15 Dec 2023, available at:

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Applied Economics



Available for download on Sunday, June 15, 2025