Efficiency of Spanish Textile Industry Before the Sector’s Liberalization

This paper examines the technical efficiency of the Spanish textile industry for the period 1995-2005, by estimating a stochastic production function. The empirical findings show that in the first half of the period most of the textile groups displayed high levels of efficiency, which can be attributed to a situation dominated by complacency and status preservation. In the second half, perhaps as a consequence of the forthcoming liberalization of the sector (on January 1, 2005), there was an increase in inefficiency. This was considered to be a result of the reaction to the new competitive scenario on the part of the enterprises, which is the force for change and the power that drives the sector