What Causes Cross-Industry Differences of Technical Efficiency?: An Empirical Investigation

Michael Fritsch () and Andreas Stephan

No 457, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Using micro-level panel data of about 35,000 firms from the German Cost Structure Census, we analyze the differences of technical efficiency across industries. Technical efficiency is estimated by firms' fixed effects. One striking result is that the distribution of technical efficiency across industries is positively skewed. This is because the efficiency distribution is truncated at the lower end due to the least efficient firms which exit the market. We investigate the causes of technical efficiency differences across industries. Our econometric analyses provide evidence that capital and human capital intensity, the degree of vertical specialization as well as new firm formation rate are important for explaining the average technical efficiency of an industry.

Keywords: Technical efficiency; Cross-industry study; Efficiency distribution (search for similar items in EconPapers)
JEL-codes: D24 L10 L11 (search for similar items in EconPapers)
Pages: 32 p.
Date: 2004
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Citations: View citations in EconPapers (5)

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Working Paper: What causes cross-industry differences of technical efficiency? An empirical investigation (2004)
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