IDEAS home Printed from https://ideas.repec.org/a/gam/jlands/v12y2023i8p1592-d1215966.html
   My bibliography  Save this article

The Financial Density and Improvement of Urban Technological Efficiency: An Estimation Based on the Stochastic Frontier Approach

Author

Listed:
  • Jing Guo

    (School of Government, Shenzhen University, Shenzhen 518060, China)

  • Ying Wang

    (Stevens Institute of Technology, Hoboken, NJ 07030, USA)

  • Haidong Xu

    (National Academy of Economic Strategy, Chinese Academy of Social Sciences, Beijing 100732, China)

  • Bo Li

    (School of Management, Tianjin University of Technology, Tianjin 300384, China)

  • Yang Wang

    (School of Management, Shenzhen University, Shenzhen 518060, China)

Abstract

Exploring the relationship between finance and economic growth is a key direction of financial economics. However, most of the literature starts from the aggregate perspective and uses the GDP or per capita GDP as the explained variable to study the role of finance. Such a perspective ignores the heterogeneity of financial activities with respect to geographical distribution and makes it difficult to distinguish the roles of factor input and efficiency improvement. Because of this, this article introduces a “density” perspective on new economic geography and the measurement of the efficiency of the transition of development economics into financial economics. This article uses the stochastic frontier analysis (SFA) method to measure the technical efficiency (TE) of 272 cities in China from 2005 to 2018 and then, based on “forward-looking” and “backward-looking” methods, measures the impact of financial density on urban technical efficiency. This study found that overall, before the financial crisis in 2008, the contribution of financial density to technical efficiency showed a downward trend, and in the regional and provincial dimensions, the distribution of financial density’s contribution to technical efficiency was generally in line with that of backward regions, with less regularity in developed regions. In the urban dimension, the contribution rate of financial density to resource-based cities with slow technological progress or advanced cities with rich financial resources is not very prominent and may even play a negative role; however, cities that are at a medium level of development, rich in population resources, have convenient transportation, and have a certain industrial foundation can greatly promote the improvement of technical efficiency. Therefore, it may be possible to optimize the marginal contribution of urban financial density to the technical efficiency of Chinese cities by encouraging the flow of financial resources and activities from cities with small marginal effects to those with large marginal effects.

Suggested Citation

  • Jing Guo & Ying Wang & Haidong Xu & Bo Li & Yang Wang, 2023. "The Financial Density and Improvement of Urban Technological Efficiency: An Estimation Based on the Stochastic Frontier Approach," Land, MDPI, vol. 12(8), pages 1-21, August.
    • Handle: RePEc:gam:jlands:v:12:y:2023:i:8:p:1592-:d:1215966
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2073-445X/12/8/1592/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2073-445X/12/8/1592/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 2017. "The Revolution of Information Economics: The Past and the Future," NBER Working Papers 23780, National Bureau of Economic Research, Inc.
    2. Kumbhakar, Subal C., 1991. "Estimation of technical inefficiency in panel data models with firm- and time-specific effects," Economics Letters, Elsevier, vol. 36(1), pages 43-48, May.
    3. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    4. Jerzmanowski, Michal, 2007. "Total factor productivity differences: Appropriate technology vs. efficiency," European Economic Review, Elsevier, vol. 51(8), pages 2080-2110, November.
    5. Uri, Noel D., 2003. "The adoption of incentive regulation and its effect on technical efficiency in telecommunications in the United States," International Journal of Production Economics, Elsevier, vol. 86(1), pages 21-34, October.
    6. Scholtens, Bert & van Wensveen, Dick, 2000. "A critique on the theory of financial intermediation," Journal of Banking & Finance, Elsevier, vol. 24(8), pages 1243-1251, August.
    7. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117, Elsevier.
    8. Altunbas, Y. & Chakravarty, S. P., 2001. "Frontier cost functions and bank efficiency," Economics Letters, Elsevier, vol. 72(2), pages 233-240, August.
    9. Farrokh Nourzad, 2002. "Financial development and productive efficiency: A panel study of developed and developing countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 26(2), pages 138-148, June.
    10. Henry, Michael & Kneller, Richard & Milner, Chris, 2009. "Trade, technology transfer and national efficiency in developing countries," European Economic Review, Elsevier, vol. 53(2), pages 237-254, February.
    11. Timothy J. Coelli & D.S. Prasada Rao & Christopher J. O’Donnell & George E. Battese, 2005. "An Introduction to Efficiency and Productivity Analysis," Springer Books, Springer, edition 0, number 978-0-387-25895-9, December.
    12. Allen, Franklin & Santomero, Anthony M., 1997. "The theory of financial intermediation," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1461-1485, December.
    13. Robert C. Merton, 1995. "A Functional Perspective of Financial Intermediation," Financial Management, Financial Management Association, vol. 24(2), Summer.
    14. Jaison R. Abel & Ishita Dey & Todd M. Gabe, 2012. "Productivity And The Density Of Human Capital," Journal of Regional Science, Wiley Blackwell, vol. 52(4), pages 562-586, October.
    15. Noel Uri, 2003. "The Effect of Incentive Regulation in Telecommunications in the United States," Quality & Quantity: International Journal of Methodology, Springer, vol. 37(2), pages 169-191, May.
    16. Franklin Allen & Douglas Gale, 2001. "Comparative Financial Systems: A Survey," Center for Financial Institutions Working Papers 01-15, Wharton School Center for Financial Institutions, University of Pennsylvania.
    17. Tim Coelli & Sergio Perelman & Elliot Romano, 1999. "Accounting for Environmental Influences in Stochastic Frontier Models: With Application to International Airlines," Journal of Productivity Analysis, Springer, vol. 11(3), pages 251-273, June.
    18. Sylviane GUILLAUMONT JEANNENEY & PING HUA & ZHICHENG LIANG, 2006. "Financial Development, Economic Efficiency, And Productivity Growth: Evidence From China," The Developing Economies, Institute of Developing Economies, vol. 44(1), pages 27-52, March.
    19. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    20. Kumbhakar, Subal C. & Wang, Hung-Jen, 2005. "Estimation of growth convergence using a stochastic production frontier approach," Economics Letters, Elsevier, vol. 88(3), pages 300-305, September.
    21. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    22. Bian, Yiwen & Yang, Feng, 2010. "Resource and environment efficiency analysis of provinces in China: A DEA approach based on Shannon's entropy," Energy Policy, Elsevier, vol. 38(4), pages 1909-1917, April.
    23. Franklin Allen & Douglas Gale, 2001. "Comparing Financial Systems," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511258, April.
    24. Kai Chang & Xiaochang Cheng & Yiran Wang & Qiming Liu & Jie Hu, 2023. "The impacts of ESG performance and digital finance on corporate financing efficiency in China," Applied Economics Letters, Taylor & Francis Journals, vol. 30(4), pages 516-523, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ali M. Oumer & Amin Mugera & Michael Burton & Atakelty Hailu, 2022. "Technical efficiency and firm heterogeneity in stochastic frontier models: application to smallholder maize farms in Ethiopia," Journal of Productivity Analysis, Springer, vol. 57(2), pages 213-241, April.
    2. Wang, Miao & Wong, M. C. Sunny, 2012. "International R&D Transfer and Technical Efficiency: Evidence from Panel Study Using Stochastic Frontier Analysis," World Development, Elsevier, vol. 40(10), pages 1982-1998.
    3. Sabrina Auci & Laura Castellucci & Manuela Coromaldi, 2021. "How does public spending affect technical efficiency? Some evidence from 15 European countries," Bulletin of Economic Research, Wiley Blackwell, vol. 73(1), pages 108-130, January.
    4. Karim L. Anaya & Michael G. Pollitt, 2014. "Does Weather Have an Impact on Electricity Distribution Efficiency? Evidence from South America," Working Papers EPRG 1404, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. Farsi, Mehdi & Filippini, Massimo, 2009. "An analysis of cost efficiency in Swiss multi-utilities," Energy Economics, Elsevier, vol. 31(2), pages 306-315, March.
    6. Christopoulos, Dimitris K. & McAdam, Peter, 2019. "Efficiency, Inefficiency, And The Mena Frontier," Macroeconomic Dynamics, Cambridge University Press, vol. 23(2), pages 489-521, March.
    7. Deng, Yaguo, 2024. "A Bayesian semi-parametric approach to stochastic frontier models with inefficiency heterogeneity," DES - Working Papers. Statistics and Econometrics. WS 43837, Universidad Carlos III de Madrid. Departamento de Estadística.
    8. Nguyen, Hoa-Thi-Minh & Do, Huong & Kompas, Tom, 2021. "Economic efficiency versus social equity: The productivity challenge for rice production in a ‘greying’ rural Vietnam," World Development, Elsevier, vol. 148(C).
    9. Christian Growitsch & Tooraj Jamasb & Michael Pollitt, 2009. "Quality of service, efficiency and scale in network industries: an analysis of European electricity distribution," Applied Economics, Taylor & Francis Journals, vol. 41(20), pages 2555-2570.
    10. Robert Lensink & Aljar Meesters, 2014. "Institutions and Bank Performance: A Stochastic Frontier Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(1), pages 67-92, February.
    11. Jakub Growiec & Anna Pajor & Dorota Gorniak & Artur Predki, 2015. "The shape of aggregate production functions: evidence from estimates of the World Technology Frontier," Bank i Kredyt, Narodowy Bank Polski, vol. 46(4), pages 299-326.
    12. Lin, Boqiang & Yang, Lisha, 2013. "The potential estimation and factor analysis of China′s energy conservation on thermal power industry," Energy Policy, Elsevier, vol. 62(C), pages 354-362.
    13. Danquah, Michael, 2018. "Technology transfer, adoption of technology and the efficiency of nations: Empirical evidence from sub Saharan Africa," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 175-182.
    14. Subal Kumbhakar & Gudbrand Lien & J. Hardaker, 2014. "Technical efficiency in competing panel data models: a study of Norwegian grain farming," Journal of Productivity Analysis, Springer, vol. 41(2), pages 321-337, April.
    15. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.
    16. Heshmati, Almas & C. Kumbhakar, Subal & Kim, Jungsuk, 2016. "Persistent and Transient Efficiency of International Airlines," Working Paper Series in Economics and Institutions of Innovation 444, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    17. Anne-Kathrin Faust & Andrea Baranzini, 2014. "The economic performance of Swiss drinking water utilities," Journal of Productivity Analysis, Springer, vol. 41(3), pages 383-397, June.
    18. Alexander Rathke & Ulrich Woitek, 2008. "Economics and the Summer Olympics," Journal of Sports Economics, , vol. 9(5), pages 520-537, October.
    19. Mei-Foong, Wong & Hui-Boon, Tan & Hon, Lee Yoong, 2014. "Firm-Specific Characteristics And Technical Efficiency Of Electronics Manufacturing Firms In China," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 10(1-2), January.
    20. Dyah Wulan Sari & Noor Aini Khalifah & Suyanto Suyanto, 2016. "The spillover effects of foreign direct investment on the firms’ productivity performances," Journal of Productivity Analysis, Springer, vol. 46(2), pages 199-233, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jlands:v:12:y:2023:i:8:p:1592-:d:1215966. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.