Evaluate the Investment Efficiency by Using Data Envelopment Analysis: The Case of China


Although investment is regarded as a key force of China’s economic growth, little study has been done to measure China’s investment efficiency. The present paper applies the data envelopment analysis (DEA) to Chinese provincial panel data from the year 2003 to 2008 for measuring the investment efficiencies and identifying their trends of Chinese 30 provinces and autonomous regions. A cross-efficient DEA model with considering benevolent formulation is used for providing accurate efficiency scores and completely ranking. The empirical results suggest that the differences of investment efficiency in different regions are distinct but tending to diminish year by year, and the investment efficiencies in some provinces are significantly correlated to their investment rates to the national total investment.

Share and Cite:

H. Zhang, W. Song, X. Peng and X. Song, "Evaluate the Investment Efficiency by Using Data Envelopment Analysis: The Case of China," American Journal of Operations Research, Vol. 2 No. 2, 2012, pp. 174-182. doi: 10.4236/ajor.2012.22020.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] G. C. Chow, “A Model of Chinese National Income Determination,” Journal of Political Economy, Vol. 93, No. 4, 1985, pp. 782-791. doi:10.1086/261330
[2] G. C. Chow, “Capital Formation and Economic-Growth in China,” Quarterly Journal of Economics, Vol. 108, No. 3, 1993, pp. 809-867. doi:10.2307/2118409
[3] L. X. Sun, “Estimating Investment Functions Based on Cointegration: The Case of China,” Journal of Comparative Economics, Vol. 26, No. 1, 1998, pp. 175-191. doi:10.1006/jcec.1997.1501
[4] H. Song, Z. Liu and P. Jiang, “Analysing the Determinants of China’s Aggregate Investment in the Reform Period,” China Economic Review, Vol. 12, No. 2-3, 2001, pp. 227-242. doi:10.1016/S1043-951X(01)00052-9
[5] X. He and D. Qin, “Aggregate Investment in People’s Republic of China: Some Empirical Evidence,” Asian Development Review, Vol. 21, 2004, pp. 99-117.
[6] J. Zhang, “Capital Formation, Industrialization and Economic Growth,” Economic Research Journal, Vol. 7, 2002, pp. 3-13 (in Chinese).
[7] Q. Yu, “Capital Investment, International Trade and Economic Growth in China: Evidence in the 1980-90s,” China Economic Review, Vol. 9, No. 1, 1998, pp. 73-84. doi:10.1016/S1043-951X(99)80005-4
[8] A. C. C. Kwan, Y. Wu and J. Zhang, “Fixed Investment and Economic Growth in China,” Economics of Planning, Vol. 32, No. 1, 1999, pp. 67-79. doi:10.1023/A:1003424418042
[9] D. Qin, M. A. Gagas, P. Quising and X. He, “How Much Does Investment Drive Economic Growth in China?” Journal of Policy Modeling, Vol. 28, No. 7, 2006, pp. 751-774. doi:10.1016/j.jpolmod.2006.02.004
[10] D. Qin and H. Song, “Sources of Investment Inefficiency: The Case of Fixed-Asset Investment in China,” Journal of Development Economics, Vol. 90, No. 1, 2009, pp. 74- 145. doi:10.1016/j.jdeveco.2008.06.001
[11] A. Young, “The Razor’s Edge Distortions and Incremental Reform in the People’s Republic of China,” The Quarterly Journal of Economics, Vol. 115, No. 4, 2000, pp. 1091-1136. doi:10.1162/003355300555024
[12] J. Zhang, “Investment, Investment Efficiency, and Economic Growth in China,” Journal of Asian Economics, Vol. 14, No. 5, 2003, pp. 713-734. doi:10.1016/j.asieco.2003.10.004
[13] A. Charnes, W. W. Cooper and E. Rhodes, “Measuring the Efficiency of Decision Making Units,” European Journal of Operational Research, Vol. 3, No. 4, 1970, pp. 429- 444. doi:10.1016/0377-2217(79)90229-7
[14] T. R. Sexton, R. H. Silkman and A. J. Hogan, “Data Envelopment Analysis: Critique and Extensions,” In: R. H. Silkman, Ed., Measuring Efficiency: An Assessment of Data Envelopment Analysis, Jossey-Bass, San Francisco, 1986, pp. 73-105.
[15] J. Doyle and R. Green, “Efficiency and Cross Efficiency in DEA: Derivations, Meanings and the Uses,” Journal of the Operational Research Society, Vol. 45, 1994, pp. 567- 578.
[16] T. Jian, J. Sachs and A. Warner, “Trends in Regional Inequality in China,” China Economic Review, Vol. 7, No. 1, 1996, pp. 1-21. doi:10.1016/S1043-951X(96)90017-6

Copyright © 2024 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.