Is China’s Manufacturing Technical Efficiency Cost-push?

YE Zhenyu1 and YE Suyun2

1. Institute of Industrial Economics, Chinese Academy of Social Sciences

2. School of Agricultural Economics and Rural Development, Renmin University of China

Abstract:

Do rising factor prices promote technical efficiency (TE) in China’s manufacturing sectors? This topic has not yet been thoroughly studied in any literature. Using panel data from 1993 to 2007 of Chinese provinces’ manufacturing industries, this paper calculated the TE by data envelopment analysis (DEA). The result shows that China’s manufacturing TE remained stagnate in the mid- and late-1990s and increased after 2000. Using a Pooled Regression Model, Fixed-effects Regression Model and Panel Corrected Standard Error (PCSE) to obtain robust parameters and the standard error, we find that rising factor prices have an obvious positive effect on the TE of the manufacturing industry and that this effect reaches its peak three to five years later. Therefore, the assumption of a “cost-push TE” in China’s manufacturing sectors can now be statistically proven. It has verified the significance of reforming China’s factor price system. Governments should value resource-allocating efficiency, implement policies that promote industrial transition and upgrading and transform the economic development pattern through technical innovation.

Key words:

factor price, data envelopment analysis, technical efficiency

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