Brick by Brick: Performance Analysis of the Dutch Construction Sector

Understanding of one of the major building blocks of real estate development is at least partial. How do firms in the construction sector perform? Does the relative performance change over the business cycle? Do differences in performance relate to observable characteristics? Understanding the performance within the construction industry is of importance in advising both policy makers and managing boards how to boost productive performance. Also, with a better understanding one would better understand real estate fundamentals across regions over time. We propose unlike neoclassical theory of the firm that firms not necessarily operate fully efficiently due to organizational or market failures like perverse incentives, hidden actions, imperfect information, strategic behaviour and moral hazard. Subsequently we formulate a nonparametric efficiency framework DEA in which production is related to inputs used in the production process. We apply the framework to a micro sample of Dutch firms in the Construction Industry to calculate the performance within the sample over various years. As such we would like to get a better understanding of the real estate market building on contributions of others; brick by brick.