Efficiency Test on Taiwan's Life Insurance Industry-Using X-Efficiency Approach

摘要

Using twenty-three years of data, 1981-2003, I was estimating translog cost function for 26 life insurance companies. Distribution free analysis (DFA) was applied to determine the relative efficiency of insurers in the sample. I then tested the constants to see if they were related to so-called X-efficiencies because of market share, diversification products strategy, scale efficiency and market growth ratio. Results show that firms with large market share tend to be cost efficient. This result coincide the current policy which encourages merge and acquisition.