Technical Efficiency, Allocative Efficiency and Profitability in Hungarian Small and Medium-Sized Enterprises: A Model with Frontier Functions
Abstract:By applying a simple model of frontier production functions, this article shows that Hungarian small and medium-sized enterprises (SMEs) produce far below their feasible level, given their input endowment. The SMEs' under-production is rooted in the allocative inefficiency of small and medium-sized firms: they use labour in excess while they lack a sufficient level of capital assets. As a consequence of large inefficiencies, Hungarian SMEs improve profitability by scaling down production rather than by expansion.
Document Type: Research Article
Affiliations: Institute of Economics, The Hungarian Academy of Sciences, Budapest
Publication date: October 1, 2008