A stochastic frontier approach to measuring regional technical efficiency in China

This paper applied a stochastic translog production function to examine the underlying causes of technical inefficiency for 28 provinces in the mainland China over the period 1970-2004. We found that inefficiency was present in production and several relevant explanatory variables contributed to it. Specifically we found that the provinces with higher level of human capital, higher engagement in international trade, and further relaxation of the household registration system (hukou system) and a smaller government size tended to lie closer to the national frontier. In addition, we found that public infrastructure was not productive and we found no evidence to support the general view that state-owned enterprises (SOEs) were operating relatively inefficiently as compared to the non-SOEs.