G. Karagiannis (Department of International and European Economic & Political Studies, University of Macedonia, Thessaloniki 540 06, Greece) S. C. Kumbhakar (Department of Economics, State University of New York, Binghamton, NY 13902, USA.) E. G. Tsionas (Department of Economics, Athens University of Economics and Business, Athens, Greece.)
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This paper presents a procedure for measuring technical and allocative inefficiency in an input distance function framework. The procedure involves solving a system of equations to compute the unobserved cost minimizing input vector that is used to compute the cost of allocative inefficiency. The system is non-linear but a rather simple linear approximation may also be used. Thus we show that the input distance function approach provides information not only on the extent of input over - (under-) utilization but also their impact on cost.
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Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.
Volume (Year): 39 (2004) Issue (Month): 1 (January) Pages: 19-30 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
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