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Efficiency of the Korean defense industry: A stochastic frontier approach
Defense Acquisition Program Administration, Seoul, South Korea.
University of Kurdistan Hawler, Hawler, Federal Region of Kurdistan, Kurdistan, Iraq.ORCID iD: 0000-0002-7902-4683
2009 (English)In: Productivity, efficiency, and economic growth in the Asia-Pacific region, Heidelberg: Physica Verlag, 2009, 217-254 p.Chapter in book (Refereed)
Abstract [en]

The defense market, which is composed of a sole demander and few suppliers, is generally regarded as a monopolistic market. In this sense, it has its own characteristics that are different from other common competitive markets. High precision technology and a huge amount of capital investment in the initial stage of production are essential in the defense industry, and this necessitates subsidy policy of the government. Most of the supplies are produced in an order-based manner due to the special specification requirements and this hampers the market-driven pricing mechanism. The price is determined based on negotiations between the two parties, considering the cost of production, retrieval of the investment, and efficient allocation of the government budget. This study is organized as follows. The history of the Korean defense industry and policies are summarized in Sect. 10.2. The data is described in Sect 10.3. In Sect 10.4, this study sets out the stochastic frontier production function for the analysis of efficiency and the model for decomposition of TFP. The results of the estimation of the stochastic frontier model are presented in Sect 10.5, where technical efficiency, testing results on factors affecting efficiency and decomposition of TFP are discussed. Lastly, Sect 10.6 presents the conclusions of this study. ©2009 Physica-Verlag Heidelberg.

Place, publisher, year, edition, pages
Heidelberg: Physica Verlag, 2009. 217-254 p.
Series
Contributions to economics, ISSN 1431-1933
Keyword [en]
defense industry; investment; modeling; stochasticity; technical efficiency; technology, Korea
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-24531Scopus ID: 2-s2.0-77950486081ISBN: 978-3-7908-2071-3 (print)OAI: oai:DiVA.org:hj-24531DiVA: diva2:742732
Available from: 2014-09-02 Created: 2014-09-01 Last updated: 2016-01-14Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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  • de-DE
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