Journal of Economics and Management Volume 15, No. 2 August, 2019

A Meta Stochastic Frontier Analysis of Industry-level Energy Efficiency in OECD Countries

Jin-Li Hu

Institute of Business and Management, National Chiao Tung University, Taiwan.

Satoshi Honma

School of Political Science and Economics, Tokai University, Japan.

Abstract

This research follows the two-step output stochastic frontier analysis (SFA) approach of Huang et al. (2014), but instead applies the panel-data input SFA model proposed of Honma and Hu (2014) to estimate the total-factor energy efficiency (TFEE) of industries across countries in different years. The metafrontier TFEE denotes a product of the group TFEE and the technological gap ratio (TGR).  Using four inputs (labor, capital stock, energy, and non-energy intermediate inputs) and one output (value added), we take economic data and purchasing power parity (PPP) data from EU-KLEMS (2008). The energy and economic dataset contains seven industries in 14 developed countries for the period 1995-2005. The European continental countries have a higher technical level in their energy use for the chemical and petrochemical industries, since their TGR scores are generally higher than those in other countries. These countries also have a higher average metafrontier energy efficiency for the chemical industry and perform better than the other (non-European continental) group with respect to technology gap ratios for most industries, except for the iron, steel, and non-ferrous metals industries. The European continental group performs better than the other group with respect to metafrontier energy efficiency for all seven industries.

Keywords：Two-Step Input Stochastic Frontier Analysis, Input Metafrontier Analysis, Energy Efficiency.

JEL Classifications：D24, C51.

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