Firm Size Distribution, Production Efficiency, and Returns to Scale: A Stochastic Frontier Approach

Hien Thu Pham and Shino Takayama ()
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Hien Thu Pham: School of Economics, The University of Queensland, https://economics.uq.edu.au

No 581, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This paper empirically investigates the relationship between firm size, production efficiency, and returns to scale. Using a recently developed stochastic frontier approach and data from Vietnam, our analysis shows that across all of the sectors we consider, production efficiency is most variable among middle-sized firms, with these firms across all sectors tending to have the lowest production efficiency. While most firms across different sized groups show constant returns-to-scale technologies, our analysis using Spearman coefficients shows that there is a significant difference in technologies and this difference varies substantially across size groups in all sectors. Furthermore, we show that the least-efficient size also differs across sectors. Although our analysis is a snapshot of the Vietnamese manufacturing industry, the diverse production efficiencies in the middle-sized groups can be thought of as a risk that small-sized firms would face in expanding their business.

Keywords: Firm size distribution; Missing middle; Productivity; Efficiency; Stochastic frontier (search for similar items in EconPapers)
JEL-codes: D21 D22 L25 (search for similar items in EconPapers)
Date: 2017-04-19
New Economics Papers: this item is included in nep-bec, nep-eff, nep-sbm, nep-sea and nep-tra
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:581

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