Firm size and technical efficiency: Applications of production frontiers to Indian survey data☆

Abstract This paper is an empirical investigation of the relationship between relative technical efficiency and firm size in four Indian manufacturing industries. A frontier translog production function is used to derive measures of technical inefficiency at the enterprise level. Given the properties of the estimated production frontier these indices of technical efficiency are also indices of total factor productivity (TFP) which is the single most widely accepted measure of productive efficiency. Variations in technical efficiency are correlated with several explanatory variables, including size of firm. Firm size is found to be positively associated with relative productive efficiency in only one of the four industries.

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