Industrial Efficiency Evaluation in China: A Nonparametric Production-Frontier Approach

An industrial system has positive and negative strategies to adapt to environmental regulations, which can be defined as natural disposability and managerial disposability. Meanwhile, the operational process of an industrial system can be divided into regular production activities and pollutant control activities. Within this, industrial system's technical efficiency (TE) can be decomposed into economic efficiency (ECE) and environmental efficiency (ENE). On the basis of natural disposability and managerial disposability, this paper proposes static and dynamic data envelopment analysis (DEA) models to evaluate the efficiencies of industrial systems. Based on the proposed approach, TE, ECE, ENE, and Malmqusit productivity index (MPI) values were obtained simultaneously. The MPI values were further separated into the effects of static efficiency change and technical change. The proposed method was applied to assess the technical efficiencies of Chinese regional industrial systems between 2011 and 2015. Key findings are that (1) the low ENE is the main source of technical inefficiency; (2) the average static TE and ENE under natural disposability are both lower than those under managerial disposability; (3) the static efficiency change and technical change of TE are similar to those of ENE; and (4) the technical change has a significant impact on the changes in TE.