Technical efficiency of Spanish construction sector pre- and post- housing bubble burst

Abstract

The main objectives of this paper are to measure the technical efficiency levels of Spanish construction sector before and during the current financial crisis and to investigate the degree to which various factors influence efficiency levels in this sector. Stocastic frontier analysis (SFA) methods are applied to firm-level data over the period 1996-2011. Despite its contribution to the Spanish economy the technical efficiency of the Spanish construction industry has neither been measured, nor the factors influencing the efficiency have been analyzed. The results show that technical efficiency is significantly shorter at the beginning of the financial crisis than during the financial crisis. Results also show that firms that went bankrupt, on average have a lower technical efficiency level than firms that did not go bankrupt in the period before the Spanish housing bubble burst. We also identify several important factors affecting technical efficiency levels. Our empirical results indicate that age, size, level of diversification, level of corporate transparency an level of debt have a significant influence on technical efficiency levels.