Scale, factor intensity and efficiency: an empirical study of the chinese coal industry

This paper deals with the interrelationship among firm scale, factor intensity and efficiency using the Chinese industrial survey data in 1985 and stochastic frontier models. According to empirical analyses made, it is found that (1) labour-intensive enterprises are, on an average, more efficient than capital-insentive ones; (2) there are no gains from economies of scale among the sample; and (3) the existence of a two-tier price system greatly influences, either directly or indirectly, the performance of the Chinese enterprises. It is also observed that mines like the county and prefectural level ones are able to overcome disadvantages associated with small scale and to benefit from other sources of efficiency. Overall, they reveal the highest efficiency ratings.