Research On Relationship Of Market Structure,Scale And Efficiency In China's Iron And Steel Enterprises

The iron and steel industry is a fundamental strategic industry in China.The improvement of efficiency and performance of which plays an important role to the stability and development of the steel industry itself and the national economy.Some studies indicate that the industry concentration ratio is too low and the scale of firms is too small which is bad for the improvement of efficiency,but others has the opposite opinions that China steel industry has the characteristic of diseconomy of scale and there is not an obvious relation between efficiency and market structure.It is important to make clear whether the steel industry has the characteristic of scale economy or diseconomy of scale and the relation between efficiency and market structure which is the foundation of making reasonable industrial policy.On the relationship of market structure and performance,there are plenty of studies on this topic either abroad or domestic.Most of them can be summarized into two theories:market power hypothesis and efficiency structure hypotheses.Different theories bring forward different policy orientation.It is important to make clear whether the iron and steel industry has the characteristic of scale economy or diseconomy of scale and the relation between efficiency and market structure which is the foundation of making reasonable industrial policy.Therefore in this paper I first estimate the efficiency,pure efficiency and scale efficiency in China steel industry employing DEA method.Then I investigate the relationship among efficiency,market structure and the scale of firms.My main findings are:there is a characteristic of diseconomy of scale in China steel industry;large firms have no obvious advantage against small firms;there is no evidence of neither market power hypothesis nor efficiency structure hypothesis;there is a negative correlation between efficiency and the industry concentration ratio,increasing the industry concentration ratio does not plays a role on improving efficiency;strengthening management to improve management efficiency and improving manufacturing technique is a way to improve efficiency;there is a positive correlation between efficiency and market share,improving efficiency plays an important role on increasing the market share of steel firms.