Efficiency Estimation for Textile Industry in India, 1989-2000
22 Pages Posted: 24 Apr 2019
Date Written: March 25, 2011
Paper applies stochastic frontier production (SFP) function to measure efficiency of textile firms in India. In SFP models with panel data (balanced or unbalanced) unobservable firm efficiency levels are related to explanatory variables. The SFP were first proposed by Aigner, Lovell and Schmidt (1977), and postulates the existence of technical inefficiencies of production of firms involved in producing a particular product.
A SFP function is defined for set of panel data1 on 652 textile firms for the period 1989-2000. The time period is chosen to cover a sufficiently long period so that we are able to examine more issues and in more depth. Output is measured by net value added, age or experience of the firm by years since establishment, Ratio’s loan/equity implies credit availability, total exports by sales gives export orientation, total imports by raw material gives import intensity, gives energy intensity. The mean technical efficiency of the firms is found to be 63%. The three fourth of the firms have efficiency in the range of 0.5 to 0.9.
Keywords: Textile, Frontier model, Panel data
JEL Classification: C23, D24, L67, L52
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