Which One is More Efficient? German or Japanese Automobile Industry: A Meta-frontier with Technology Gap Comparison

Abstract

The goal of this paper is to compare the cost efficiency of the automobile industry in Germany and Japan during the period of 1980-2014 by applying the Meta-Frontier Cost Function. Despite the constant competition and the global automobile industry crisis during 2008-2010, only a few existing studies compare the efficiency of the industry cross countries. However, these all fail to address various types of technology adopted and the environment faced by automakers across countries. The meta-frontier model became a recognized and useful tool to evaluate technical efficiency of firms applying dissimilar technologies. Overall, the results signify that the cost efficiency of the German automobile industry by average is better than that of the Japanese one and the German one uses more superior production technique though it was lower the Japanese one in the 1980s. The difference reversed in the 1990s and has been enlarging since the 1990s to the end of the observation period.