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Technical efficiency and technologically independent sub-markets

Author

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  • Chaaban, J.M.

Abstract

This paper aims to provide a consistent empirical methodology for investigating the level of Minimum Efficient Scale (MES) in a single product industry, through the assessment of relative productive performance. Two deterministic approaches are used to evaluate firm-level technical efficiency : a parametric method, Corrected Ordinary Least Squares (COLS) ; and a non-parametric one, Data Envelopment Analysis (DEA). The methodology is applied to a sample of French soft cheese firms in 1997, containing detailed firm-level cost and production information. Results show a high correlation between the two estimation methods, and the (estimated) scale efficient firms are situated at the minimum of the sample's observed average cost curve, leading to inference about the level of MES. An empirical methodology to identify sub-samples of firms with similar technological characteristics is also proposed, allowing the indentification of various levels of MES. This shows how technologically independent sub-markets can coexist in the same industry. ...French Abstract : Ce papier présente une nouvelle méthodologie empirique qui permet l'identification de sous-groupes technologiques dans une industrie mono produit. En utilisant pour la première fois des données individuelles sur la quantité et les coûts de production dans l'industrie des fromages à pâtes molles, on montre en estimant des frontières de production paramétriques et non paramétriques l'existence de deux frontières technologiques dans une même industrie. Un niveau minimal de production oû les entreprises seraient efficaces (économies d'échelle) existe à la fois pour des petites entreprises avec une technologies intensive en travail et pour des grandes entreprises avec une échelle de production plus importante.

Suggested Citation

  • Chaaban, J.M., 2004. "Technical efficiency and technologically independent sub-markets," Economics Working Paper Archive (Toulouse) 200404, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
  • Handle: RePEc:rea:inrawp:200404
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    File URL: http://www.toulouse.inra.fr/centre/esr/wpRePEc/cha200404.pdf
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    Cited by:

    1. Jad Chaaban & Vincent Réquillart & Audrey Trévisiol, 2005. "The role of technical efficiency in takeovers: Evidence from the French cheese industry, 1985-2000," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 545-564.

    More about this item

    Keywords

    TECHNICAL EFFICIENCY; MINIMUM EFFICIENT SCALE; MARKET STRUCTURE; DATA ENVELOPMENT ANALYSIS; CORRECTED ORDINARY LEAST SQUARES ; IAA; FROMAGE A PATE MOLLE; COUT DE PRODUCTION; ECONOMIE D'ECHELLE; EFFICACITE; TECHNOLOGIE;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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