In this paper we estimate the technical efficiency of Mexican states using several stochastic production frontier models. The empirical section uses panel data over the period 1988-2008. A distinctive feature of the paper is to use socioeconomic and location data in order to control for the heterogeneity of the states. We find that inefficiency explains part of the difference in production across regions, which is not accounted by other explanatory variables. Our results show that infrastructure, education, productive specialization and the presence of oil production shift the production frontier upwards. Additionally, northern states are more efficient than the rest of the country.
