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Measuring Technical Efficiency in the Indian Automobile Industry

Author

Listed:
  • Ritwik Mazumder

    (Ritwik Mazumder (corresponding author), Department of Economics, Assam University, Silchar, Assam, India. Email: r_itwikm@yahoo.com)

  • Maniklal Adhikary

    (Maniklal Adhikary, Department of Economics, University of Burdwan, Burdwan, West Bengal, India. Email: drmaniklaladhikary@gmail.com)

Abstract

This study has measured firm-specific time invariant technical efficiency in the Indian automobile industry during 2004–06 using a suitably constructed stochastic production frontier. The one-sided inefficiency random variable is assumed to be truncated normal with a variable mode which is non-neutral with respect to some selected firm-specific factors, capable of explaining inter-firm variations in the level of technical inefficiency. It is found that age of the firm since inception and level of technical efficiency are inversely associated. However, the market share of the firm and the degree of automation are found to be positively associated with firm level technical efficiency. Statistical tests further reveal that the underlying technology in the automobile industry in India is linear homogeneous.

Suggested Citation

  • Ritwik Mazumder & Maniklal Adhikary, 2010. "Measuring Technical Efficiency in the Indian Automobile Industry," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 11(1), pages 53-67, March.
  • Handle: RePEc:sae:soueco:v:11:y:2010:i:1:p:53-67
    DOI: 10.1177/139156141001100104
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    References listed on IDEAS

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    1. S Madheswaran & Hailin Liao & Badri Narayan RathAuthor-Email: smadhes@yahoo.co.uk, 2007. "Productivity growth of Indian manufacturing sector: panel estimation of stochastic production frontier and technical inefficiency," Journal of Developing Areas, Tennessee State University, College of Business, vol. 40(2), pages 35-50, January-M.
    2. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, number 9780195072181.
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    5. Kumbhakar, Subal C & Ghosh, Soumendra & McGuckin, J Thomas, 1991. "A Generalized Production Frontier Approach for Estimating Determinants of Inefficiency in U.S. Dairy Farms," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 279-286, July.
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    More about this item

    Keywords

    Technical Efficiency; Stochastic Production Frontier; Indian Automobile Industry; Inefficiency Effects Model; JEL: C23; JEL: C51; JEL: L60;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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