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Industry structural inefficiency and potential gains from mergers and break-ups: A comprehensive approach

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  • Peyrache, Antonio
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    Abstract

    An efficiency indicator of industry configuration (allowing for entry/exit of firms) is presented which accounts for four sources components: (1) size inefficiencies arising from firms which can be conveniently split into smaller units; (2) efficiency gains realized through merger of firms; (3) re-allocation of inputs and outputs among firms; (4) technical inefficiencies. The indicator and its components are computed using linear and mixed-integer programming (data envelopment analysis models). A method to monitor the evolution of these components in time is introduced. Data on hospitals in Australia show that technical inefficiency of hospitals accounts for less than 15% of total industry inefficiency, with 40% attributable to size inefficiencies and the rest to potential mergers and re-allocation effects.

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    Bibliographic Info

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

    Volume (Year): 230 (2013)
    Issue (Month): 2 ()
    Pages: 422-430

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    Handle: RePEc:eee:ejores:v:230:y:2013:i:2:p:422-430

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

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    Keywords: Data envelopment analysis; Industry inefficiency; Size inefficiency; Mergers; Break-ups; Directional distance function;

    References

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    Cited by:
    1. Antonio Peyrache, 2014. "Cost Constrained Industry Ine," CEPA Working Papers Series WP042014, School of Economics, University of Queensland, Australia.

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