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Technical efficiency and technologically independent sub-markets

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  • Chaaban, J.M.

Abstract

This paper aims to provide a consistent empirical methodology for investigating the level of Minimum Efficient Scale (MES) in a single product industry, through the assessment of relative productive performance. Two deterministic approaches are used to evaluate firm-level technical efficiency : a parametric method, Corrected Ordinary Least Squares (COLS) ; and a non-parametric one, Data Envelopment Analysis (DEA). The methodology is applied to a sample of French soft cheese firms in 1997, containing detailed firm-level cost and production information. Results show a high correlation between the two estimation methods, and the (estimated) scale efficient firms are situated at the minimum of the sample's observed average cost curve, leading to inference about the level of MES. An empirical methodology to identify sub-samples of firms with similar technological characteristics is also proposed, allowing the indentification of various levels of MES. This shows how technologically independent sub-markets can coexist in the same industry. ...French Abstract : Ce papier présente une nouvelle méthodologie empirique qui permet l'identification de sous-groupes technologiques dans une industrie mono produit. En utilisant pour la première fois des données individuelles sur la quantité et les coûts de production dans l'industrie des fromages à pâtes molles, on montre en estimant des frontières de production paramétriques et non paramétriques l'existence de deux frontières technologiques dans une même industrie. Un niveau minimal de production oû les entreprises seraient efficaces (économies d'échelle) existe à la fois pour des petites entreprises avec une technologies intensive en travail et pour des grandes entreprises avec une échelle de production plus importante.

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Bibliographic Info

Paper provided by French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse) in its series Economics Working Paper Archive (Toulouse) with number 200404.

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Length: 35 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:rea:inrawp:200404

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Related research

Keywords: TECHNICAL EFFICIENCY; MINIMUM EFFICIENT SCALE; MARKET STRUCTURE; DATA ENVELOPMENT ANALYSIS; CORRECTED ORDINARY LEAST SQUARES ; IAA; FROMAGE A PATE MOLLE; COUT DE PRODUCTION; ECONOMIE D'ECHELLE; EFFICACITE; TECHNOLOGIE;

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Cited by:
  1. Jad Chaaban & Vincent Réquillart & Audrey Trévisiol, 2005. "The role of technical efficiency in takeovers: Evidence from the French cheese industry, 1985-2000," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 545-564.

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