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

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

Pan-Hong Zhang, Gong-Bing Bi
Copyright: © 2017 |Volume: 8 |Issue: 3 |Pages: 20
ISSN: 1947-9328|EISSN: 1947-9336|EISBN13: 9781522513315|DOI: 10.4018/IJORIS.2017070101
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MLA

Zhang, Pan-Hong, and Gong-Bing Bi. "Exploring Production Function and Cost Efficiency Decomposition with VRS Assumption in China's Iron and Steel Industry." IJORIS vol.8, no.3 2017: pp.1-20. http://doi.org/10.4018/IJORIS.2017070101

APA

Zhang, P. & Bi, G. (2017). Exploring Production Function and Cost Efficiency Decomposition with VRS Assumption in China's Iron and Steel Industry. International Journal of Operations Research and Information Systems (IJORIS), 8(3), 1-20. http://doi.org/10.4018/IJORIS.2017070101

Chicago

Zhang, Pan-Hong, and Gong-Bing Bi. "Exploring Production Function and Cost Efficiency Decomposition with VRS Assumption in China's Iron and Steel Industry," International Journal of Operations Research and Information Systems (IJORIS) 8, no.3: 1-20. http://doi.org/10.4018/IJORIS.2017070101

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Abstract

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.

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