Technical and Allocative Efficiency in Chinese Manufacturing Industries
Open Access
- Author:
- Wu, Yingxian
- Graduate Program:
- Agricultural Economics
- Degree:
- Master of Science
- Document Type:
- Master Thesis
- Date of Defense:
- May 10, 2010
- Committee Members:
- Spiro Stefanou, Thesis Advisor/Co-Advisor
Karen Ann Fisher-Vanden, Committee Member
Edward C Jaenicke, Committee Member - Keywords:
- shadow prices
technical efficiency
allocative efficiency
China - Abstract:
- Since the economic reform in the late 1970s, the Chinese enterprises have undergone a great transformation, changing from non-profit-seeking entities to profit-seeking entities. However, it is still unknown whether this transformation is complete. To answer this question, I evaluate the cost-minimizing behavior of 12 Chinese manufacturing industries using shadow prices and allocative efficiency. With survey data for large- and medium-firms, I find the average allocative efficiency to be only 67% of its potential. Capital and energy are found to be greatly overused, while labor is slightly underused compared to materials. Another goal of this study is to find whether there is significant difference in the performance of different industry sectors. This is measured by industry-specific technical efficiency. It is found that industries differ in their relative performance. Chemical, food, machinery and rubber industries present the highest technical efficiency, while electricity, petroleum and other industries present the lowest technical efficiency, with mining, metals, nonmetals, textiles and timber falling in-between. A correlation analysis reveals that technical efficiency is highly correlated with foreign capital intensity in the industry.