Evolution of technical efficiency in Chinese coal mining firms: the roles of competition and technology

Abstract

ABSTRACT This study examines the evolution of technical efficiency (TE) and its determinants in China’s high-pollution coal mining industry. The effects of market competition, technology, and pollution abatement expenditure (PAE) on inefficiency are investigated. Using a firm-level panel dataset for the 2001–2013 period, estimation using a panel stochastic frontier model shows that the average TE was stable with a small fluctuation in the 2000s and then deteriorated in the 2010s. The majority of private entrants have lower TE than the main group of incumbents, state-owned enterprises, whereas foreign firms exhibit the highest TE among firms. We find that capital imports, research and development, and government subsidies are important factors in reducing technical inefficiency, highlighting the importance of technological activity on production efficiency. Further analysis of the relationship between PAE and TE reveals that PAE positively contributes to the efficiency of coal mining firms. Robustness checks ensure the aforementioned findings.