Technical Efficiency in the Iron and Steel Industry: A Stochastic Frontier Approach

Jung Woo Kim, Jeong Yeon Lee (), Jae Yong Kim and Hoe Kyung Lee
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Jung Woo Kim: Samsung Economic Research Institute, Seoul, Korea
Jeong Yeon Lee: Graduate School of International Studies, Yonsei University
Jae Yong Kim: Korea Institute Public Finance, Seoul Korea
Hoe Kyung Lee: Korea Advanced Institute of Science of Science and Technology, Seoul, Korea

No 75, Economics Study Area Working Papers from East-West Center, Economics Study Area

Abstract: In this paper we examine the technical efficiency of firms in the iron and steel industry and try to identify the factors contributing to the industry's efficiency growth, using a time-varying stochastic frontier model. Based on our findings, which pertain to 52 iron and steel firms over the period of 1978-1997, POSCO and Nippon Steel were the most efficient firms, with their production, on average, exceeding 95 percent of their potential output. Our findings also shed light on possible sources of efficiency growth in the industry. If a firm is government-owned, its privatization is likely to improve its technical efficiency to a great extent. A firm's technical efficiency also tends to be positively related to its production level as measured by a share of the total world production of crude steel. Another important source of efficiency growth identified by our empirical findings is adoption of new technologies and equipment. Our findings clearly indicate that continued efforts to update technologies and equipment are critical in pursuit of efficiency in the iron and steel industry.

JEL-codes: C23 L61 O33 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2005-04
New Economics Papers: this item is included in nep-eff and nep-ino
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