Estimating Technical Efficiency of Iranian Oil and Gas Pipe Manufacturing Industry Using Stochastic Frontier Function Estimation

Sharif Azadeh, Mohammad Reza; Basirat, Mehdi

doi:10.22096/esp.2013.26127

Estimating Technical Efficiency of Iranian Oil and Gas Pipe Manufacturing Industry Using Stochastic Frontier Function Estimation

Document Type : Original Article

Authors

Mohammad Reza Sharif Azadeh ¹

Mehdi Basirat ²

¹ Associate Professor, Islamic Azad University, Science and Research Branch, Tehran

² PhD student in Economics, Islamic Azad University, Science and Research Branch, Tehran

10.22096/esp.2013.26127

Abstract

Oil and natural gas are the most important energy resources and are of strategic importance in global, economic and political relations. Therefore, their transfer equipments and processes are very crucial and using pipe lines for this purpose is considered significant because it is the fastest and safest means. In this study, we attempted to estimate the technical efficiency of oil/gas pipes industry by using the stochastic frontier approach (SFA) method. We also used the Battese and Coelli time varying technical efficiency model. The tests result showed that the Cobb-Douglas production function can explain the pipe manufacturing industry better. Also, we calculated the extended significance ratio statistic to study the existence of any technical inefficiency in this industry; the results proved this. Nation the results also revealed that the average technical efficiency of this industry has increased from 53.57% in 1375 to 74.72% in 1389. One of the reasons for the increasing trend of technical efficiency of this industry is the increase of oil price, and hence, the increased investment in the country’s oil/gas industry (especially, in the South Pars field) and the increased need for pipes.

Keywords

Technical Efficiency

Stochastic Frontier Production

Composed Error Model

Oil and Gas Pipe Manufacturing Industry

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