The Measurement of Productive E ciency

1985

In Chap. 1, we introduced efficiency as the use of the fewest inputs (resources) to produce the most outputs (services). This idea is fundamental to much of modern benchmarking literature because it allows us to evaluate performance without clearly defined preferences. That is, we avoid the difficult task of estimating preference functions and deciding on exact priorities. We will expand on this below. Although the notion of efficiency is simple and intuitive at first glance, there are actually many different ways to conceptualize efficiency. We shall discuss some of the most common concepts in this chapter. We will cover classical concepts from production theory, including technical efficiency, allocative efficiency, and scale efficiency , as well as more advanced concepts like dynamic efficiency and structural efficiency. Moreover, several of these concepts can be operationalized in different ways. We can, for example, measure technical efficiency in terms of input space, output space, or both types of spaces. We can also measure it in specific directions, etc. The aim of this chapter is to provide an overview of efficiency-related concepts as well as bits and pieces of the relevant theoretical background.

Aggregation, Efficiency, and Measurement, 2007

International Journal of Production Economics, 1996

In this paper different data envelope analysis (DEA) models are compared in terms of their potential to generate a quantitative measure of the degree of inefficiency. The Russell [1] measure in particularly appealing since it is not restricted to simple proportional comparisons. However, its actual value is sensitive to the choice of weights on the different inputs (or outputs) in the objective function. This may be of little significance in a simple binary classification of efficient and inefficient firms. However when evaluating the degree of efficiency, and hence the "distance" of a firm from the efficient envelope, choice of metric becomes critical. A number of alternative metrics are compared, including the "stability index" of Charnes et al. [2] and an alternative approach is suggested using the nature of the linear program itself. The paper concludes with a numerical illustration.

We provide a dual perspective on technical efficiency evaluation, in two respects. First, we build on the price assumptions implicitly associated with the notion of technical efficiency in a general equilibrium framework to characterize a set of appropriate references to be used in the technical efficiency evaluation of an inputoutput vector. Some existing evaluation methods always select an element of this set, but other methods fail to do so. Second, the above framework leads us to assert that a well-grounded measure of technical efficiency is naturally decomposable. One part refers to technical efficiency as captured by the classical Debreu-Farrell measure. The other part refers to technical efficiency resulting from the "implicit allocative efficiency" or "mix efficiency" of the evaluated vector. We present both a quantitybased distance measure and its price-based equivalent to evaluate this complementary dimension of technical efficiency. This generalized perspective encompasses the standard Debreu-Farrell framework for technical efficiency evaluation, and makes it fully consistent with the well-established Koopmans efficiency notion.

1997

In the literature, technical efficiency is measured as the ratio of observed output to potential output. Although there is no a priori theoretical reasoning, in the stochastic framework of measuring technical efficiency, the potential output is defined as a neutral shift from the observed output. The objective in this paper is to suggest a method to measure technical efficiency without having to consider the potential output as a neutral shift from the observed output.

Ann Publ Cooper Econ, 1989

Economic Modelling, 2011

This contribution revisits the debate on the axiomatic properties satisfied by various radial versus non-radial measures of technical efficiency in production. This issue arises whenever isoquant and efficient subset of technology diverge and hence traditional radial measurement does not comply with Koopmans' definition of technical efficiency. This axiomatic approach to technical efficiency measurement is revisited within the framework of the more recently introduced directional distance function. This analysis provides the opportunity to define some new directional efficiency measures.

Annals of Public and Cooperative Economics, 1989