Variable Input Use Research Articles

Relative efficiency in Chinese urban construction: A comparison of state-owned and collective enterprises after reform

This paper estimates the relative efficiency of locally-controlled urban collective and provincially-controlled state-owned enterprises in the Chinese construction industry between 1985 and 1988, a period following significant economic reforms. A generalized restricted translog cost function approach is used which allows for both fixed and variable factor choices to deviate from profit-maximizing outcomes. Results indicate that collectives were less efficient in this sample than state-owned enterprises in the use of variable inputs, and this gap was not closing by 1988. State-owned enterprises were, however, much less efficient in the use of capital, even when the measure of capital is adjusted for a relatively higher percentage of nonproductive investment. For both sectors of Chinese construction, the growth rate of total factor productivity (or average technical efficiency) rose to approximately four percent per year by 1988, but this improvement did not extend to more cost-efficient combinations of inputs.

Input Allocation in Multicrop Systems

AbstractUsing data only on aggregate variable input use and land allocation, this paper suggests a methodology for allocating variable input use among crops and improvement of regional crop budget information. Two approaches for estimation of variable input allocations among production activities are examined. One relies on behavioral rules whereby input allocations follow accepted rules of thumb. The alternative approach is derived from profit maximization where input use responds instantaneously to changes in input and output prices. The behavioral rules dominate instantaneous response to prices in explaining the data analyzed in this paper and suggest the validity of a simple behavioral approach for developing enterprise budgets and cost of production estimates.

INefficiency, public enterprise and privatisation

There is a general perception, based upon casual observation and some systematic empirica! study, that public enterprises are inefllcient.! This paper takes this to be true, and is concerned with the problem of providing a rigorous analysis and explanation of this inefficiency.2 Privatisation, which, in the U.K. at least has received its primary impetus from political and ideological motivarions,3 has also been supported by some economists4 because it is seen as a way of correcting these ine~ciencies. To test this argument, the analysis of public enterprise ine~ciency will be extended in this paper to the issue of privatisation. The analysis is an application of the theory of agency,s and in particular makes extensive use of the model of the adverse selection or incentive compatability problem. 6 Privatisation is regarded essentially as a change in the structure of this principal-agent model. Briefly, the adverse selection agency model deals with the situation in which an agent is supposed to take decisions on behalf of a principal, but has his own objectives which may lead him to act in his own as opposed to the principal’s interests. If the principal possessed all the information held by the agent, such conflict would not be possible. However, in the adverse selection model the agent possesses some ‘private’ info~ation which is not available to the principal. The agent will report a message concerning this ‘For example, see the papers by Btis, and by P&man and Pestieau, ctsewherc in this volume. *It may be useful to distinguish between ‘short-run’ inetliciency, in the sense of wasteful use of variable inputs, especially labour. and ‘long-run’ inefficiency, in the sense of ‘great planning disasters’, major inefficiencies in investment planning. For interesting discussion of the latter, possibly more important type of inefficiency, see Henderson (1977). jThc aims of widening the base of share ownership among households, and of ‘rolling back the frontiers of the public sector’, as well as the short term political advantage of disguising part of government borrowings as the sale of shares in privatised companies have all been relevant

Aggregate factor input and productivity in agriculture: A comparison for the EC-member countries, 1963–76

A description is given in this article of the development of total production, aggregate factor input and total factor productivity within the agricultural sector of the EC-member countries. The first part contains a comparative analysis of various input capacities and their time profiles. Comparability of data base and methodology is emphasized. Individual factor components (labour, machinery and buildings, land and variable inputs) are then aggregated by using a Divisia-chain index with variable weights. A similar aggregation is performed for total production and finally an international comparison of the index of total factor productivity is presented. The results indicate that both the rates of change and the time profiles of the total factor input have been very different in the various countries. Moreover, the differences in factor productivities have grown. Countries, which had already reached a comparatively high level of factor productivity, have also had the highest growth rates of the productivity index. The growth rate of the agricultural total productivity within the EC-9 has slightly increased, by an average 1.8% between 1963 and 1976. Although the capacity of the total factor input has increased in some countries, it has shrunk in others, namely in Germany, Great Britain and Denmark. On average, within the EC-9, the decline of labour and land inputs has been compensated by the increased use of variable inputs and capital. Hence, the total factor input in the agricultural sector of the EC-9 has remained fairly constant, so that the growth rates of agricultural production and productivity have been at the same average rate of 2% per year.