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Measuring productivity growth under factor non-substitution: An application to US steam-electric power generation utilities

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  • Genius, Margarita
  • Stefanou, Spiro E.
  • Tzouvelekas, Vangelis

Abstract

A theoretical framework is developed for decomposing partial factor productivity and measuring technical inefficiency when the underlying technology is characterized by factor non-substitution. With Farrell’s (1957) radial index of technical inefficiency being inappropriate in this case, Russell non-radial indices are adapted to measure technical inefficiency in a Leontief-type model. A system of factor demand equations with a regime specific technical inefficiency term is proposed and estimated allowing for dependence across inputs using a copula approach. Then the paper presents a complete decomposition of partial factor productivity changes using a dataset of US steam-power electric generation utilities.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Operational Research.

Volume (Year): 220 (2012)
Issue (Month): 3 ()
Pages: 844-852

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Handle: RePEc:eee:ejores:v:220:y:2012:i:3:p:844-852

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Web page: http://www.elsevier.com/locate/eor

Related research

Keywords: Productivity and competitiveness; OR in energy; Productivity growth; Technical efficiency; Factor non-substitution; Leontief-type technologies;

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