Production Losses Due to Technical Inefficiency: A Panel Data Analysis on the Case of BRICS-T CountriesNadide Yiğiteli
This study aims to estimate the efficiency of using the available resources and technology of BRICS-T countries. In this context, the production limit is modelled using stochastic frontier analysis (SFA) within the scope of a panel data set consisting of six countries from 1990-2019. The production frontier and technical inefficiency determinants are estimated by a one-stage method. In addition, the technical inefficiency in the model and the variances related to technical inefficiency and statistical error are defined as a function of the variables of countries’ population and export-import ratios. The study has determined these variables to have no significant impact on technical inefficiency. The results show the average level of technical efficiency during the analysis period to be 91% and countries to have lost 9% of their potential output. Turkey was determined as the country to rank first and Russia to rank last during the analyzed period in terms of the average coefficient of technical efficiency. Turkey’s production loss due to inefficiency was 3.4%, while Russia’s was 23.3%. On the other hand, technical efficiency decreased an average of 0.064% annually during the analysis period. This finding indicates countries’ adaptation to existing technologies to gradually decrease and production losses due to inefficiency to increase. The production losses due to inefficiency and the efficiency decreases observed during the analysis period reveal an important opportunity for BRICS-T countries to use their potential more effectively in terms of sustainable economic growth.
Teknik Etkinsizlik Kaynaklı Üretim Kayıpları: BRICS-T Ülkeleri Örneğinde Bir Panel Veri AnaliziNadide Yiğiteli
Çalışmada, BRICS-T ülkelerinin mevcut kaynaklarını ve teknolojiyi kullanma etkinliğinin tahmin edilmesi amaçlanmaktadır. Bu kapsamda, 1990-2019 dönemi ve 6 ülkeden oluşan bir panel veri seti ile stokastik sınır analizi (SSA) kullanılarak üretim sınırı modellenmektedir. Üretim sınırı ve teknik etkinsizlik belirleyicilerinin tahmini için tek aşamalı bir yöntem kullanılmaktadır. Ayrıca, modelde teknik etkinsizlik ile teknik etkinsizliğe ve istatistiki hata terimine ilişkin varyanslar, ülke nüfusu ve ihracatın ithalatı karşılama oranı değişkenlerinin bir fonksiyonu olarak tanımlanmaktadır. Çalışmada, söz konusu değişkenlerin, teknik etkinsizlik üzerinde anlamlı bir etkisi olmadığı tespit edilmektedir. Bulgular, analiz döneminde teknik etkinlik düzeyinin ortalama %91 olduğunu ve ülkelerin bu dönemde potansiyel çıktılarının %9’unu kaybettiğini göstermektedir. Analiz döneminde ortalama teknik etkinlik katsayısı açısından ilk sırada yer alan ülke Türkiye, son sırada yer alan ülke ise Rusya olarak tespit edilmiştir. Türkiye’nin etkinsizlik kaynaklı üretim kaybı %3,4 iken Rusya’nın %23,3’tür. Ayrıca Rusya analiz dönemi süresince etkinliğini artıran tek ülke olarak tespit edilmiştir. Diğer yandan analiz döneminde, yıllık ortalama olarak teknik etkinlik %0,064 azalış göstermiştir. Bu bulgu, ülkelerin mevcut teknolojilere uyumlarının giderek azaldığına ve etkinsizlik kaynaklı üretim kayıplarının arttığına işaret etmektedir. Gerek etkinsizlik kaynaklı üretim kayıpları gerekse analiz döneminde gözlemlenen etkinlik düşüşleri, sürdürülebilir ekonomik büyüme açısından BRICS-T ülkelerinin potansiyellerini daha etkin kullanmalarının önemli bir fırsat alanı olduğunu göstermektedir.
The degree to which the inputs are used effectively in current production technology is determined by the production function, which shows the functional relationship between the output and inputs used in production. Converting inputs into output takes place under a specific production technology. The maximum output obtained under a specific input composition or the minimum input composition needed to achieve a specific output level determines the upper frontier of production possibilities. Economic units produce at or below this frontier. Technical efficiency is achieved when the input-output composition defined by the production function is located at a point on the production frontier. Technical inefficiency is defined as a situation where a difference occurs between the maximum output values of the production technology and the actual observed production values, with the coefficient of technical efficiency taking values between 0 and 1 otherwise. A country’s inefficiency and production losses increase as this value approaches 0, while a value of 1 indicates that the country is producing at the production frontier and using its full production potential. Economic units produce at a technically inefficient point and so cannot use their current potential effectively. In this case, production losses are experienced, and production being able to be increased by activating this potential. Technical efficiency and the capacity to absorb the existing technology of economies is an essential factor that increases the speed of catching up with developed economies with high per capita income. However, achieving the potential level of output contained in the production technology (i.e., increasing technical efficiency) is subject to countries’ limitations in absorbing existing technology.
This study aims to estimate the efficiency of using the available resources and technology of BRICS-T countries. In this context, the production limit is modelled using stochastic frontier analysis (SFA) within the scope of a panel dataset consisting of six countries for the period of 1990-2019. The production frontier and technical inefficiency determinants are estimated by a one-stage method. In addition, the technical inefficiency and the variances related to technical inefficiency and statistical error in the model are defined as a function of the variables of countries’ populations and export-import ratios. The study has determined that these variables do not significantly affect technical inefficiency but do have a significant effect on the variances related to technical inefficiency and the statistical error term. The results show the average level of technical efficiency during the analysis period to be 91% and countries to have lost 9% of their potential output. Turkey was determined to have ranked first and Russia last in terms of the average coefficient of technical efficiency for countries during the analyzed period, with Turkey’s production loss due to inefficiency being 3.4% and Russia’s was 23.3%. Meanwhile, technical efficiency decreased an average of 0.064% annually during the analysis period. The other countries experienced efficiency losses during the analysis period, while Russia’s technical efficiency increased by 0.74%. According to the study results, Russia’s compliance with the current level of technology, therefore, increased during the analysis period and its production losses due to inefficiency decreased.
This finding indicates that the BRICS-T countries’ adaptation to existing technologies to have gradually decreased, and production losses due to inefficiency to have increased. The production losses due to inefficiency as well as the efficiency decreases observed during the analysis period, show an important opportunity to exist for economies to use their potential more effectively in terms of sustainable economic growth. The countries’ performances regarding to adapting to technologies require educational processes involving new technologies being learned and taught, as well as precise, predictable social, political, and economic structures.