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Are Indian Firms too Small? A Nonparametric Analysis of Cost Efficiency and Industry Structure of Indian Manufacturing

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  • Subhash C. Ray

    (University of Connecticut)

Abstract

In this paper we use the 2004-05 Annual Survey of Industries data to estimate the levels of cost efficiency of Indian manufacturing firms in the various states and also get state level measures of industrial organization (IO) efficiency. The empirical results show the presence of considerable cost inefficiency in a majority of the states. Further, we also find that, on average, Indian firms are too small. Consolidating them to attain the optimal scale would further enhance efficiency and lower average cost.

Suggested Citation

  • Subhash C. Ray, 2008. "Are Indian Firms too Small? A Nonparametric Analysis of Cost Efficiency and Industry Structure of Indian Manufacturing," Working papers 2008-10, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2008-10
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    References listed on IDEAS

    as
    1. Ray,Subhash C., 2012. "Data Envelopment Analysis," Cambridge Books, Cambridge University Press, number 9781107405264.
    2. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    3. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    4. Subhash Ray & Xiaowen Hu, 1997. "On the Technically Efficient Organization of an Industry: A Study of U.S. Airlines," Journal of Productivity Analysis, Springer, vol. 8(1), pages 5-18, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Data Envelopment Analysis; Efficient Production Scale; Industry Efficiency;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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