TECHNICAL EFFICIENCY IN PRODUCTION IN A DEVELOPING COUNTRY: AN EMPIRICAL EXAMINATION OF THE BRAZILIAN PLASTICS AND STEEL INDUSTRIES.

This paper estimates firm specific indexes of technical efficiency for the Brazilian plastics and steel industries. Two different indexes are employed for the empirical estimates—the Farrell index and an index developed from a linear programming approximation of a nonstochastic frontier production function specified in the Cobb-Douglas functional form. Evidence of substantial relative technical inefficiency is revealed. In both industries only a very small proportion of all the observed firms were producing amounts of output greater than 80 percent of that technically possible on the estimated frontier. Relative efficiency of the firms in the two industries was not seen to be significantly related to ownership (foreign or government), but tests did suggest a tendency for larger firms, possessing larger market shares, to be closer to the frontier than smaller firms. [ABSTRACT FROM AUTHOR]