This paper does two things. First, it presents alternative approaches to the standard methods of estimating productive efficiency using a production function. It favours a parametric approach (viz. the stochastic production frontier approach) over a non-parametric approach (e.g. data envelopment analysis); and, further, one that provides a statistical explanation of efficiency, as well as an estimate of its magnitude. Second, it illustrates the favoured approach (i.e. the ‘single stage procedure’) with estimates of two models of explained inefficiency, using data from the Thai manufacturing sector, after the crisis of 1997. Technical efficiency is modelled as being dependent on capital investment in three major areas (viz. land, machinery and office appliances) where land is intended to proxy the effects of unproductive, speculative capital investment; and both machinery and office appliances are intended to proxy the effects of productive, non-speculative capital investment. The estimates from these models cast new light on the five-year long, post-1997 crisis period in Thailand, suggesting a structural shift from relatively labour intensive to relatively capital intensive production in manufactures from 1998 to 2002.
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Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number
0906.
Find related papers by JEL classification: C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East L69 - Industrial Organization - - Industry Studies: Manufacturing - - - Other L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
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