Organizational Form and Efficiency: Evidence from Indian Sugar Manufacturing

Frontier cost and production functions are used to examine the effects of ownership on intrafirm differences in technical, cost, and allocative efficiency in the Indian sugar processing industry. Cooperatives are found to be as or more efficient than their counterparts. The results suggest that technical and coordination economies of vertical integration provide important advantages for the cooperative form of organization. We also find that seasonal labor is overutilized and permanent labor is underutilized relative to their cost-minimizing proportions. This is possibly a second-best solution in light of employment regulations. J. Comp. Econom., August 1995, 21(1), pp.29-53. U.S. International Trade Commission, Washington, DC 20463; University of Arkansas, Fayetteville, Arkansas, 72701-1201.