Please use this identifier to cite or link to this item: https://hdl.handle.net/11000/4935

Can Farrell’s allocative efficiency be generalized by the directional distance function approach?.


Thumbnail

View/Open:
 6-Aparicio_Pastor_Zofio_EJOR2017.pdf
768,88 kB
Adobe PDF
Share:
Title:
Can Farrell’s allocative efficiency be generalized by the directional distance function approach?.
Authors:
Aparicio Baeza, Juan
Pastor Ciurana, Jesús Tadeo
ZofÍo, José L.
Department:
Departamentos de la UMH::Estadística, Matemáticas e Informática
Issue Date:
2016-08-10
URI:
http://hdl.handle.net/11000/4935
Abstract:
Cost or revenue efficiency measurement based on the approach initiated by Farrell has received great at- tention from academics and practitioners since the fifties. Farrell’s approach decomposes cost efficiency into two different sources, viz. technical efficiency and allocative efficiency. Technical efficiency is esti- mated by means of the Shephard input or output distance functions, while allocative efficiency is derived as a residual between cost or revenue efficiency and its corresponding technical efficiency component. The directional distance function ( DDF ) was introduced later in the literature to complete duality theory with respect to the profit function and as a generalization of the Shephard input and output distance functions. Considering the case of cost efficiency we show that, although the DDF correctly encompasses the technical efficiency component of the Farrell approach, this is not true for the allocative component. We show that both approaches yield different allocative (in)efficiency terms –unless technical efficiency is assumed, and how these terms are related. The practical implications of the multiplicative and additive approaches are discussed and illustrated.
Keywords/Subjects:
Technical efficiency
Allocative efficiency
Directional distance functions
Type of document:
application/pdf
Access rights:
info:eu-repo/semantics/openAccess
Appears in Collections:
Artículos Estadística, Matemáticas e Informática



Creative Commons ???jsp.display-item.text9???