The Efficiency of Input Use During the Early Transition in Hungary

This paper uses Hungarian firm level panel data for the agricultural and light manufacturing sectors during the early years of the transition to investigate differences and changes in the efficiency of input use. Programming techniques measure scale and technical efficiency. The simple radial measure, as well as two other measures that account for programming slacks, are used. The results show little wastage of materials and labour, but inefficient use of energy and capital, which suggests that the development of input markets was uneven. The price liberalisation of 1989 widened efficiency differences, especially in agriculture, but this sector recovered quickest, actually using capital more efficiently by 1991. However, energy efficiency levels were low in the period of soft budget constraints and fell still further after the reforms, suggesting that a free market for energy was not established, particularly in agriculture.