An analysis on technical efficiency in post-reform China

Research Highlights► This paper presents a time-variant estimation of technical efficiency in post-reform China. ► A fully nonparametric stochastic model is used to measure technical efficiency. ► The average technical efficiency has declined in the mid-1980s but increased since 1992. ► Eastern and Southern regions show a higher than national average level of technical efficiency.

This paper employs a fully nonparametric stochastic frontier model with time and individual effects to study technical efficiency in China's post-reform economy. The panel data cover China's thirty provinces for the period of 1985-2008. The empirical results show that the average output elasticity of labor is larger than the other two inputs of capital and human capital. Based on the specified inefficiency Tobit model, the factor analysis on technical efficiency shows that the time effects of technical efficiency in China's post-reform economy are significantly contingent on the factors. There exists significant regional differences in technical efficiency in China's economic development, and a number of policy implications can be drawn.