The Estimation of Technical Efficiency Effects Models with an Example Applied to the Thai Manufacturing Sector

Suwanee Arunsawadiwong and Gavin Reid

No 906, CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: This paper does two things. First, it presents alternative approaches to the standard methods of estimating productive efficiency using a production function. It favours a parametric approach (viz. the stochastic production frontier approach) over a non-parametric approach (e.g. data envelopment analysis); and, further, one that provides a statistical explanation of efficiency, as well as an estimate of its magnitude. Second, it illustrates the favoured approach (i.e. the ‘single stage procedure’) with estimates of two models of explained inefficiency, using data from the Thai manufacturing sector, after the crisis of 1997. Technical efficiency is modelled as being dependent on capital investment in three major areas (viz. land, machinery and office appliances) where land is intended to proxy the effects of unproductive, speculative capital investment; and both machinery and office appliances are intended to proxy the effects of productive, non-speculative capital investment. The estimates from these models cast new light on the five-year long, post-1997 crisis period in Thailand, suggesting a structural shift from relatively labour intensive to relatively capital intensive production in manufactures from 1998 to 2002.

Keywords: productive efficiency; stochastic production frontier; Thai manufacturing sector (search for similar items in EconPapers)
JEL-codes: C21 L64 L69 L85 N65 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-eff and nep-sea
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Working Paper: The Estimation of Technical Efficiency Effects Models with an Example Applied to the Thai Manufacturing Sector (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:san:crieff:0906

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