Exploring Production Function and Cost Efficiency Decomposition with VRS Assumption in China's Iron and Steel Industry

The study presents an empirical efficiency analysis for China's iron and steel industry by applying data envelopment analysis. From a theoretical perspective, an improved method is proposed to allow decision makers to select the production function between linear and exponential forms under the assumption of variable returns-to-scale. From a practical perspective, the paper attempts to explore the production function form of 15 representative iron and steel companies in China. Furthermore, the cost efficiency is decomposed into technical efficiency and allocative efficiency in this context. Some suggestions are put forward to improve inefficient companies.