A comparative study of production efficiency in coastal region and non-coastal region in Mainland China: An application of metafrontier model

ABSTRACT

This paper examines production efficiency of coastal region and non-coastal region in Mainland China between 2000 and 2010 using one-step stochastic frontier analysis and two-step metafrontier model. Unlike previous studies, this study not only discusses production efficiencies but also considers differences in production patterns. The empirical results indicate that coastal region has better production performance in metafrontier technology efficiency (MTE) and technology gap ratio (TGR). In addition, this study finds that the gap of MTE and TGR between coastal region and non-coastal region is increasing for the past years.

KEYWORDS:

• Metafrontier model
• technical efficiency
• technical gap
• mainland China

JEL Classifications:

• D24
• O49
• P40
• R19

Acknowledgements

We would like to thank two anonymous reviewers, Chiting Chen and Phoenix Yang for many suggestions which helped to improve the presentation and quality of the research, any shortcomings that remain in this research paper are solely our responsibility.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Refer to the World Bank website: http://data.worldbank.org.

2. The representative production frontier constructed may not be able to envelop production frontier of different groups.

3. Related studies are Naughton (2006) and Fan, Kanbur, and Zhang (2009).

4. Battese and Coelli (1995) recommend to apply as technical efficiency estimates.

5. This paper uses the concept of stochastic frontier method combined with tracking data to analyze the production efficiency for provinces and municipalities in mainland China. For related information about tracking production efficiency, please refer to Battese and Coelli (1992, 1995).

6. Coastal provinces include Fujian, Guangdong, Guangxi, Hainan, Hebei, Jiangsu, Liaoning, Shanghai, Shandong, Tianjin, and Zhejiang, while non-coastal provinces include Anhui, Beijing, Chongqing, Gansu, Guizhou, Heilongjiang, Henan, Hubei, Hunan, Inner Mongolia, Jilin, Jiangxi, Ningxia, Qinghai, Shanxi, Sichuan, Shaanxi, Xinjiang, and Yunnan. Tibet is excluded in this study due to paucity of data.

7. For studies related to congestion caused by transportation construction in Europe, see Logi and Ritchie (2001), Lin, Lan, and Chang (2009), and Lin, Lan, and Chang (2012).