Sources of productive efficiency: International comparison of iron and steel firms |
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| Authors: | Jung Woo Kim Jeong Yeon Lee Jae Yong Kim Hoe Kyung Lee |
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| Affiliation: | aSamsung Economic Research Institute, Yongsan-gu, Seoul 140-702, Republic of Korea;bGraduate School of International Studies, Yonsei University, 134 Shinchon-dong, Seodaemun-gu, Seoul 120-749, Republic of Korea;cKorea Institute of Public Finance, Songpa-gu, Seoul 138-774, Republic of Korea;dGraduate School of Management, Korea Advanced Institute of Science and Technology, Dongdaemun-gu, Seoul 130-722, Republic of Korea |
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| Abstract: | Using a time-varying stochastic frontier model, this paper examines the technical efficiency of firms in the iron and steel industry to try to identify the factors contributing to the industry's efficiency growth. Industry observers and policymakers tend to cite most frequently three possible sources of efficiency growth: privatization; economies of scale; and vintage of equipment. Our study corroborates these factors. Based on our findings, which pertain to 52 iron and steel firms over the period of 1978–1997, privatization is likely to improve the efficiency of iron and steel firms to a great extent as evidenced in various industries. This study also provides systematic evidence that iron and steel production shows economies of scale. In addition, newer vintages of equipment are found to be closely correlated with higher levels of efficiency. This clearly indicates that investment in new plants and equipments is critical in pursuit of efficiency in the iron and steel industry. |
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| Keywords: | Iron and steel industry Stochastic frontier approach Panel data |
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