The Estimation of Technical Efficiency Effects Models with an Example Applied to the Thai Manufacturing Sector
AbstractThis 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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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0906.
Date of creation: Jun 2009
Date of revision:
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productive efficiency; stochastic production frontier; Thai manufacturing sector;
Other versions of this item:
- Arunsawadiwong, Suwanee & Reid, Gavin C, 2009. "The Estimation of Technical Efficiency Effects Models with an Example Applied to the Thai Manufacturing Sector," SIRE Discussion Papers 2009-04, Scottish Institute for Research in Economics (SIRE).
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-10 (All new papers)
- NEP-EFF-2009-06-10 (Efficiency & Productivity)
- NEP-SEA-2009-06-10 (South East Asia)
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- Bauer, Paul W. & Hancock, Diana, 1993. "The efficiency of the Federal Reserve in providing check processing services," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 287-311, April.
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