Catching-up and Technological Change in Malaysian Oil and Fat Industry: A Nonparametric Frontier Analysis

Mohamed O. A.Bushara, Mohd. Ghazali Mohayidin


This paper reports the application and the estimation of the  frontier analysis that is based on deterministic  Data Envelopment Analysis (DEA) approach which encompasses the model of the input-based Malmquist  Total Factor Productivity (TFP) index (DEA).The paper shows that the application of this deterministic (DEA) frontier models  could give meaningful results regarding  technological and  economic behaviour  relationships  over time,  using  balanced panel data on the Malaysian oil and fat industry. This study was done to measure the economic performance and competitiveness of Malaysian oil and fat industry. The methodology allows the recovery of various efficiency and productivity measures in a commendable calculable manner. Specifically the study was able to answer questions related to technical efficiency, scale efficiency and productivity changes. In the study on Malaysian oil and fat industry, the innovation was improving through the gradual and slow increment of Technological Change (TC) over time. Scale inefficiency due to operating on Increasing Return to Scale (IRS) was proved in this study.  This is specially in coconut oil sector and palm kernel oil sector. However, palm oil sector was either running at Decreasing Returns to Scale (DRS) or Constant Returns to Scale(CRS). Efficiency change was contributing substantially to the total factor productivity progress and technical change to its regress in the Malaysian oil and fat industry by (0.1142%)  and(3.523% ) respectively. The competitiveness was improving overtime for this industry in the period of the study (1985-1996).

Key Words: Deterministic frontier, oil and fat industry, efficiency and productivity change    economic performance.

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