Stochastic frontier models review with applications to Vietnamese small and medium enterprises in metal manufacturing industry

Abstract

Metal manufacturing industry has an important role in the economy due to the high demand of metal products, especially steel and iron in daily life, production and, mostly construction. To help maintain and develop the benefit from this industry, it is necessary to have an analysis into the technical efficiency level of small and medium enterprises (SMEs) which takes about 97% of the number of Vietnamese enterprises. This study aims to estimate the technical efficiency level of Vietnamese SMEs using an unbalanced panel dataset in three years: 2005, 2007 and 2009 with stochastic frontier model. Besides, because of divergent literatures of panel-data stochastic frontier model, this paper also makes a review of popular ones in order to choose the suitable model for the case of Vietnamese metal manufacturing industry. The result shows different technical efficiency levels while using different models due to the divergence among identifications of technical efficiency concept.