Estimating Regional Technical Efficiency and Its Determinants: Evidence from China's Provincial Panel Data

This paper applies a stochastic translog production function to examine the underlying causes of technical inefficiency for 28 provinces in the Chinese mainland over the period 1970-2011. We find that inefficiency was present in production and several relevant explanatory variables contributed to it. Specifically, we find that the provinces with higher level of human capital, higher engagement in international trade, a further relaxation of the household registration (hukou) system and a smaller government size tended to lie closer to the national frontier. In addition, public infrastructure was not productive and we find no evidence to support the general view that state-owned enterprises (SOEs) were operating relatively inefficiently when compared to non-SOEs.