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Benchmarking Efficiency of Telecommunication Industries in the US and Major European Countries: A Stochastic Possibility Frontiers Approach

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  • Georg Erber

Abstract

The impact of ICT on the efficiency of different national telecommunication industries of the US, Germany, France, the UK and the Netherlands is analysed by using a stochastic production possibility frontier approach. The relative inefficiencies of these industries measured as distances to the general production possibility frontier are estimated by a multi-country panel maximum-likelihood-estimation. By determining the technology efficiency effect frontiers for each single country one obtains a measure for the evolution of relative inefficiencies over time for each country's industry. Looking at these different patterns a common characteristic shape of stylised J-curves is revealed. This can be interpreted as J-curves of adoption of innovations in different national telecommunication industries. Since the troughs of these J-curves occur in different years for different countries a phase delay in adoption of innovations occurs differing from country to country. The time period covered by the data include a time when the deregulation of the telecommunication industries in these countries took place and the rapid diffusion of two key innovations - the Internet and mobile communications - changed the technological and organisational foundations everywhere. The results show that even if the US telecommunication industry led in this wave of major innovations as a first mover in comparison to the others and diminished by this their relative efficiency disadvantage opposite the European countries the EU countries still maintain a comparative efficiency advantage inherited from the early 1980's. In particular after their delayed adoption of the recent innovations like deregulation and Internet began there during the late 1990's the rapid catch up of the US telecommunication industry relative to the European industries has stalled. However, overall the inefficiency differences between national telecommunication industries have decreased in the long-run. Differences in the capability to establish and maintain a competitive and innovative national industry, however, still prevail between these countries even if they have become less pronounced as before.

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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 621.

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Length: 24 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp621

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Keywords: Benchmarking; Production Possibility Frontiers; Efficiency/Inefficiency Measurement; J-Curve of Adoption of Innovations; Convergence;

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  1. Inklaar, Robert & Mahony, Mary O' & Timmer, Marcel, 2003. "ICT and Europe's productivity performance industry-level growth account comparisons with the United States," GGDC Research Memorandum 200368, Groningen Growth and Development Centre, University of Groningen.
  2. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
  3. Moch, Dietmar, 2001. "Price indices for information and communication technology industries: an application to the German PC market," ZEW Discussion Papers 01-20, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
  5. Johanna Melka & Nanno Mulder & Laurence Nayman & Soledad Zignago, 2003. "Skills, Technology and Growth is ICT the Key to Success ? An Analysis of ICT Impact on French Growth," Working Papers 2003-04, CEPII research center.
  6. Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
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