Technique efficiency and financial crises in China: Empirical study based on SFA of panel data

Abstract

China’s recent remarkable economic development has also witnessed changes in technique efficiencies associated with factors, such as R&D investment, institutional factors, human capital accumulation and trade openness. Based on stochastic frontier analysis (SFA) panel data, this paper evaluates these changing technique efficiencies in 30 Chinese administrative regions over the period from 1996 to 2009. It also conducts a quantitative evaluation of the influence administrative expenditures have on technique efficiencies and analyses the impacts of financial crises on the technique efficiencies of the Chinese provinces. The results from this study show that China’s economy is typically investment-driven and is at a stage of increasing scale of development when governmental expenditures on education, health, public goods and R&D can improve the provincial technique efficiencies. This study also points out serious imbalance in China’s technique efficiencies with those in the eastern regions being much higher than for the central and western regions. Furthermore financial crises have impacts on the technique efficiencies, including the shockwaves sent by the Asian financial crisis in 1997 and the 2008 Global Financial Crisis. The technique efficiencies have been further influenced significantly by the recent global financial crisis whose impact has been felt over a longer period of time. Optimising the structure of the government expenditure, improving its efficiencies and facilitating the development of the central and western regions are major tasks for increasing the provincial technique efficiencies in China.