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Economists tend to believe that production technology should exhibit increasing returns to scale first and then constant and finally decreasing returns to scale, called regular variable returns to scale (RVRS) in this paper. Further, a special pattern of RVRS production technology when there is only one output is the production function that has an S-shaped curve along any ray of inputs from the origin. In the literature on efficiency analysis, the most frequently used empirical technology is the variable returns to scale (VRS) production technology. Although it exhibits RVRS, it is unable to model nonconvex production technologies, such as the S-shaped production function. Recently, a new empirical production technology has been introduced to capture RVRS with partial convexity. This paper explores its relationship with efficiency measurement. Furthermore, a novel empirical production technology that can better capture the characteristics of the S-shaped production function is proposed. These two new production technologies provide better alternatives to the commonly used Free Disposal Hull (FDH) production technology in non-convex production with RVRS. Our new production technology is illustrated using US manufacturing industry data. If one believes that the production technology is partially convex and exhibits RVRS, it is found that the conventional VRS production technology overestimates the technical inefficiency of small production units under this belief. [ABSTRACT FROM AUTHOR]

The Chinese Government has proposed the 'Belt and Road Initiative' (BRI) in order to increase trade flows and economic prosperity among the Belt and Road (BR) member countries. The BRI may call for enlargement of economic cooperation as manifested by forming an economic or monetary union in the long term. It is therefore essential to choose a subset of member countries that fulfils the criteria for joining the potential economic or monetary union. The validity of purchasing power parity (PPP) implies well-integrated goods markets and is a pre-condition for further economic convergence. While the presence of transaction costs causes nonlinearities in the adjustment mechanism, our empirical study applies a three-regime threshold autoregressive (TAR) cointegration method for analysis. Our results support the existence of a PPP relationship with China for 12 sampled Asian member countries. Chinese policymakers can prioritize these BR countries for closer economic cooperation. Also, this TAR cointegration method can estimate the unobservable proportional transaction costs from the thresholds. The results reveal BR countries with large thresholds as targets to curtail transaction costs of trading in order to enhance the efficiency in international goods arbitrage and the degree of trade integration along the BR routes. [ABSTRACT FROM AUTHOR]

Constructs a model of Chinese coal consumption data using the cointegration and error-correction approach. Comparison with Henry's general-to-specific approach and similar models; Forecast errors.