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Technical Efficiency In The Retail Food Industry: The Influence Of Inventory Investment, Wage Levels, And Age Of The Firm

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  • Francisco J. Más

    ()
    (Universidad de Alicante)

  • Ricardo Sellers

    (Universidad de Alicante)

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    Abstract

    The objective of this paper is to estimate technical efficiency in retailing; and the influence of inventory investment, wage levels, and firm age on this efficiency. We use the output supermarket chains¿ sales volume, calculated isolating the retailer price effect on its sales revenue. This output allows us to estimate a strictly technical concept of efficiency. The methodology is based on the estimation of a stochastic parametric function. The empirical analyses applied to panel data on a sample of 42 supermarket chains between 2000 and 2002 show that inventory investment and wage level have an impact on technical efficiency. In comparison, the effect of these factors on efficiency calculated through a monetary output (sales revenue) shows some differences that could be due to aspects related to product prices. El objetivo de este trabajo se centra en la estimación de la eficiencia técnica en distribución comercial minorista, así como en analizar la influencia que la inversión en existencias, el nivel de salarios y la edad de la empresa tienen sobre dicha eficiencia. A tal efecto, se utiliza un output que pretende aislar el efecto de los precios de cada cadena de supermercados analizada, lo que permite estimar un concepto de eficiencia estrictamente técnico. La metodología se basa en la estimación de una frontera paramétrica de naturaleza estocástica. Los resultados de la aplicación empírica sobre una muestra de 42 cadenas de supermercados que operan en España entre 2000 y 2002 muestran que la inversión en existencias y el nivel de salarios ejercen una influencia positiva sobre la eficiencia. Por comparación, el efecto de estos factores sobre la eficiencia económica muestra algunas diferencias que podrían ser atribuidas al efecto de los precios aplicados por los distribuidores.

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    File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-2006-15.pdf
    File Function: Fisrt version / Primera version, 2006
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    Bibliographic Info

    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 2006-15.

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    Length: 24 pages
    Date of creation: Dec 2006
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasec:2006-15

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    Related research

    Keywords: Eficiencia; distribución comercial minorista; supermercados efficiency; retailing; supermarkets.;

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    References

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    1. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
    2. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-86, August.
    3. Lamm, R McFall, 1981. "Prices and Concentration in the Food Retailing Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 30(1), pages 67-78, September.
    4. Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Finance and Economics Discussion Series 1997-10, Board of Governors of the Federal Reserve System (U.S.).
    5. Ronald W. Cotterill, 1999. "Market power and the Demsetz quality critique: An evaluation for food retailing," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 101-118.
    6. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
    7. DeYoung, Robert & Hasan, Iftekhar, 1998. "The performance of de novo commercial banks: A profit efficiency approach," Journal of Banking & Finance, Elsevier, vol. 22(5), pages 565-587, May.
    8. Aly, Hassan Y, et al, 1990. "Technical, Scale, and Allocative Efficiencies in U.S. Banking: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 211-18, May.
    9. Zhu, Joe, 2000. "Multi-factor performance measure model with an application to Fortune 500 companies," European Journal of Operational Research, Elsevier, vol. 123(1), pages 105-124, May.
    10. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
    11. Keh, Hean Tat & Chu, Singfat, 2003. "Retail productivity and scale economies at the firm level: a DEA approach," Omega, Elsevier, vol. 31(2), pages 75-82, April.
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