Graduate Thesis Or Dissertation
 

Economic efficiency of the particle board industry of Oregon

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  • This study consists of an evaluation of economic efficiency in the particleboard industry of Oregon between 1958 and 1970. Measures of efficiency included aggregate capital and labor use in the production process, relative economies of scale, and relative technological efficiencies of individual particleboard plants. The rapid growth of the industry in terms of production, technological changes,. and a. trend toward larger plant operations raised the question of whether the industry was efficiently using capital and labor inputs in.its production of particleboard. The measurement of input efficiency is important because it indicates to industry managers the extent to which inputs are contributing to an optimum least-cost condition. The aggregate production function, utilizing the Cobb-Douglas model which expresses the relationship between output and production inputs, was used as the analytical framework for evaluating input efficiency. Cross-section and time series data were used to determine three indicators.of production input efficiency: estimated elasticity of production for each input, estimated mean marginal productivity for each input, and returns to scale in the production process. Economies of scale and individual plant efficiency were then further analyzed to determine if operating efficiencies differed between plants. Empirical results of production function analysis indicated constant returns to scale for capital and labor from 1958 to 1970, implying that output increased in direct relationship to increases in all inputs. Inefficiencies existed in the input market as capital and labor were not paid proportionate to their contribution to production from 1962 to 1970. Economies of scale results indicated that plants with outputs exceeding 80 million square feet annually were operating at relatively lower average costs than.were plants with less annual output. This implied that plants with smaller outputs were relatively less efficient in their scale of operation and. that economies of large scale might be effective in lowering average cost. Relative technological differences between individual plants implied that larger plants were more efficient in their use of capital and labor production inputs between 1960 and 1970. It was hypothesized that large scale marketing and distributions systems associated with the larger plants were conducive to near-capacity levels of production, thus permitting relatively more efficient use of production inputs. The evaluation of particleboard industry efficiency indicated that the industry was technically efficient in its use of production inputs in the production process. The criterion for this judgement was the condition of constant returns to scale, the implication being that inputs were contributing proportionately to output. However, the economic evaluation of production input use indicated that both capital and labor were contributing more to output (value of marginal product) than they were receiving for their services. Consequently, the point of optimum least-cost was not being utilized by the industry. The practical implication would be to increase the use of capital and labor through plant expansion or new facility construction so as to equate cost and input contribution to production.
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