The Relationship Between Production Efficiency and Factor Allocation Efficiency: A Case Study Based on Thermal Power in China

This paper introduces a novel decomposition method for analyzing production efficiency based on the Data Envelopment Analysis framework, addressing the limitations of traditional approaches that often fail to isolate the contributions of individual factors. The proposed method disaggregates production efficiency into capacity utilization, labor utilization efficiency, energy utilization efficiency, and technological change, providing a more granular view of how different factors contribute to overall efficiency. By incorporating both contemporaneous and intertemporal perspectives, this approach enables a comprehensive understanding of efficiency dynamics and factor interactions over time. To demonstrate the feasibility and robustness of the proposed method, we apply it to the thermal power industry using data from 30 Chinese provinces covering the period from 2011 to 2021. The empirical results validate the effectiveness of the decomposition framework, revealing distinct regional disparities in efficiency and providing insights for targeted resource optimization strategies. Based on these findings, we offer recommendations to enhance capacity utilization, improve energy efficiency, and support sustainable development within the thermal power sector. This research contributes a powerful analytical tool for disaggregating production efficiency and offers a theoretical foundation for future studies seeking to understand the nuanced relationships between comprehensive production efficiency and single-factor efficiencies, thereby supporting better policy and management decisions in complex production systems.