Sustainable Development of the China Tourism Sector: Implications from Technical and Scale Efficiency Measurements

Sung Ko Li, Chun Kei Tsang, Shu Kam Lee*

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    7 Citations (Scopus)


    This paper investigates one of the key factors of sustainable development in the tourism sector: productive efficiency. A firm is technically inefficient when it can produce a higher output level with existing input quantities. Technical inefficiency can be reduced by stimulating the incentive of workers and employing suitable managers. On the other hand, scale inefficiency occurs when an enterprise is not producing in the constant returns to scale region. Such inefficiency can be lessened by reallocating resources to achieve an optimal production scale. Most previous empirical studies of efficiency analysis are based on the assumption of convex production sets. This paper points out that when this assumption does not hold, policies on resources allocation would be misled. To remedy this deficiency, this paper adopts a newly developed empirical frontier to model nonconvexity in the production set. It is found that, in the tourism sector, travel agents and hotels are technically efficient and scale inefficient. Consequently, a policy which leads to the merging of small firms to improve the efficiency of the market will best suit the sustainable development of the tourism sector. Our results are very different from those derived from the existing production frontiers in Data Envelopment Analysis.

    Original languageEnglish
    Pages (from-to)262-271
    Number of pages10
    JournalChinese Economy
    Issue number4
    Early online date15 Dec 2020
    Publication statusPublished - 4 Jul 2021

    Scopus Subject Areas

    • Economics, Econometrics and Finance(all)

    User-Defined Keywords

    • China tourism sector
    • S-shaped production function
    • scale efficiency
    • sustainable development
    • technical efficiency


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