PUBLICATIONS & REPORTS

Contents Introduction

This paper comprises two major parts. The first part examines major stages in the historical development of Taiwan’s steel industry, with a particular focus on changing production capacity, technological development, and involvement in international trade. Recent trends in production, apparent consumption, and trade are analyzed, including a detailed review in major sub-sectors of the steel industry. The second part of this paper applies data envelopment analysis (DEA) and measures the relative operating efficiency of eight major Taiwan steel-making firms in terms of sales revenues. A single composite output and three inputs (labor, capital, and intermediate materials) are considered, and main sources of production inefficiency are examined. The estimated technical efficiency score was relatively high, 87.3 percent on average. Compared with the scale of production, the pure technical efficiency had less importance as a source of inefficiency. Overall, the application of DEA approach suggests that the development of a more efficient and competitive steel-making sector should be encouraged in Taiwan and that there should be more emphasis on improving scale efficiency, rather than pure technical efficiency.