Privatization and production efficiency in Taiwan's telecommunications industry

Many managers, economists, and policy-makers have long believed that the production of a private enterprise is more efficient than that of a public one. This paper investigated whether it was good policy to privatize Taiwan's telecommunications industry by comparing the changes in efficiency in Chunghwa Telecom Company (CHT Co.) before and after privatization. The data envelopment analysis (DEA) model was used to evaluate their operational performance both pre- and post-privatization. The technical efficiency (CRS) computed with the CCR model assuming constant returns to scale, the technical efficiency (VRS), and the scale efficiency (VRS) were obtained with the BCC model assuming variable returns to scale, using the time-series data from CHT. The findings of this study show that the production efficiencies of CHT, both pre- and post-privatization are inefficient since all of the technical efficiencies are smaller than one.

[1]  Toshiyuki Sueyoshi,et al.  Measuring efficiencies and returns to scale of Nippon telegraph & telephone in production and cost analyses , 1997 .

[2]  T. Sueyoshi,et al.  A use of a nonparametric statistic for DEA frontier shift: the Kruskal and Wallis rank test , 2001 .

[3]  Noel D. Uri,et al.  Measuring productivity change in telecommunications , 2000 .

[4]  B. Golany,et al.  Using rank statistics for determining programmatic efficiency differences in data envelopment analysis , 1996 .

[5]  John Vickers,et al.  Privatization: An Economic Analysis , 1988 .

[6]  M. Fuss,et al.  Productivity Growth in Canadian Telecommunications , 1994 .

[7]  Toshiyuki Sueyoshi,et al.  Privatization of nippon telegraph and telephone: Was it a good policy decision? , 1998, Eur. J. Oper. Res..

[8]  Noel D. Uri,et al.  The effect of incentive regulation on productive efficiency in telecommunications , 2001 .

[9]  Abraham Charnes,et al.  Measuring the efficiency of decision making units , 1978 .

[10]  Yongtae Park,et al.  The Impact of Competition on the Efficiency of Public Enterprise: The Case of Korea Telecom , 2000 .

[11]  Gary Madden,et al.  Telecommunications productivity, catch-up and innovation , 1999 .

[12]  Toshiyuki Sueyoshi,et al.  Stochastic frontier production analysis: Measuring performance of public telecommunications in 24 OECD countries , 1994 .

[13]  Yan Peng,et al.  Competition and production efficiency: Telecommunications in OECD countries , 2001, Information Economics and Policy.

[14]  A. Charnes,et al.  Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis , 1984 .

[15]  W. Baumol,et al.  Contestable Markets and the Theory of Industry Structure , 1982 .

[16]  Toshiyuki Sueyoshi,et al.  Divestiture of Nippon Telegraph and Telephone , 1996 .

[17]  A. Calabrese,et al.  Productivity Change in the Telecommunications Industries of 13 OECD Countries , 2002 .

[18]  William L. Megginson,et al.  Privatization and the sources of performance improvement in the global telecommunications industry , 2002 .

[19]  N. Uri.  MEASURING THE IMPACT OF PRICE CAPS ON PRODUCTIVE EFFICIENCY IN TELECOMMUNICATIONS IN THE UNITED STATES , 2001 .

[20]  N. Uri.  Changing productive efficiency in telecommunications in the United States , 2001 .