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Efficiency of Construction Firms in Vietnam

Author

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  • Nguyen, Khac Minh
  • Giang, Thanh Long

Abstract

This paper uses both parametric and non-parametric approaches to estimate technical efficiency for 2,298 construction firms in Vietnam in the database of the 2002 Economic Census for Enterprises by the General Statistics Office of Vietnam (GSO). It is found that results from both approaches are consistent, and they could help explain the performance efficiency of these firms. Estimates from the non-parametric approach (data envelopment analysis [DEA] model) and the parametric approach (stochastic frontier production function [SFPF] model) indicate that the average pure technical efficiency of these firms was about 60 percent (58.6% and 57.8% for DEA and SFPF, respectively). Models to test the factors influencing efficiency scores in both approaches show relatively similar results that state firms were more efficient than non-state ones, and location in Hanoi and Ho Chi Minh city did have impacts on efficiency scores. However, exploration of the net capital-labor ratio variable show that it did not influence efficiency scores in the DEA model, while it had clear influence in the SFPF model.

Suggested Citation

  • Nguyen, Khac Minh & Giang, Thanh Long, 2005. "Efficiency of Construction Firms in Vietnam," MPRA Paper 968, University Library of Munich, Germany, revised Nov 2006.
  • Handle: RePEc:pra:mprapa:968
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    File URL: https://mpra.ub.uni-muenchen.de/2872/1/MPRA_paper_2872.pdf
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    References listed on IDEAS

    as
    1. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-598, October.
    2. Nguyen, Khac Minh & Giang, Thanh Long, 2004. "Efficiency Performance of Hospitals and Medical Centers in Vietnam," MPRA Paper 1533, University Library of Munich, Germany, revised Apr 2006.
    3. Wadud, Md. Abdul., 2003. "Technical, Allocative, and economic efficiency of farms in Bangladesh: a stochastic frontier and DEA approach," Journal of Developing Areas, Tennessee State University, College of Business, vol. 37(1), pages 109-126, September.
    4. Greene, William H., 1980. "On the estimation of a flexible frontier production model," Journal of Econometrics, Elsevier, vol. 13(1), pages 101-115, May.
    5. Kumbhakar, Subal C., 1990. "Production frontiers, panel data, and time-varying technical inefficiency," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 201-211.
    6. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
    7. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
    8. Schmidt, Peter, 1976. "On the Statistical Estimation of Parametric Frontier Production Functions," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 238-239, May.
    9. Kumbhakar, Subal C., 1987. "The specification of technical and allocative inefficiency in stochastic production and profit frontiers," Journal of Econometrics, Elsevier, vol. 34(3), pages 335-348, March.
    10. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    11. Richmond, J, 1974. "Estimating the Efficiency of Production," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(2), pages 515-521, June.
    12. Kumbhakar, Subal C, 1988. "Estimation of Input-Specific Technical and Allocative Inefficiency in Stochastic Frontier Models," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 535-549, September.
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    Cited by:

    1. Mohammed, Rezgar & Saghaian, Sayed, 2014. "Technical Efficiency Estimation of Rice Production in South Korea," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162231, Southern Agricultural Economics Association.
    2. Ren-Jye Dzeng & Jih-Shong Wu, 2013. "Efficiency measurement of the construction industry in Taiwan: a stochastic frontier cost function approach," Construction Management and Economics, Taylor & Francis Journals, vol. 31(4), pages 335-344, April.

    More about this item

    Keywords

    construction firms; data envelopment analysis (DEA); stochastic frontier production function (SFPF); Tobit regression; Vietnam;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction

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