Industry structural inefficiency and potential gains from mergers and break-ups: A comprehensive approach
AbstractAn 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 230 (2013)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/eor
Data envelopment analysis; Industry inefficiency; Size inefficiency; Mergers; Break-ups; Directional distance function;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter Bogetoft & Dexiang Wang, 2005.
"Estimating the Potential Gains from Mergers,"
Journal of Productivity Analysis,
Springer, vol. 23(2), pages 145-171, 05.
- Vladimir Nesterenko & Valentin Zelenyuk, 2007. "Measuring potential gains from reallocation of resources," Journal of Productivity Analysis, Springer, vol. 28(1), pages 107-116, October.
- Forsund, Finn R & Hjalmarsson, Lennart, 1979.
"Generalised Farrell Measures of Efficiency: An Application to Milk Processing in Swedish Dairy Plants,"
Royal Economic Society, vol. 89(354), pages 294-315, June.
- Førsund, Finn R. & Hjalmarsson, Lennart, 1978. "Generalized Farrell Measures of Efficiency: An Application to Milk Processing in Swedish Dairy Plants," Working Paper Series 17, Research Institute of Industrial Economics.
- Rajiv D. Banker & Hsihui Chang & Ram Natarajan, 2005. "Productivity Change, Technical Progress, and Relative Efficiency Change in the Public Accounting Industry," Management Science, INFORMS, vol. 51(2), pages 291-304, February.
- Zelenyuk, Valentin, 2005.
"Aggregation of Malmquist Productivity Indexes,"
34689, University Library of Munich, Germany.
- R. Robert Russell & William Schworm, 2007.
"Axiomatic Foundations of Efficiency Measurement on Data-Generated Technologies,"
2007-35, School of Economics, The University of New South Wales.
- R. Russell & William Schworm, 2009. "Axiomatic foundations of efficiency measurement on data-generated technologies," Journal of Productivity Analysis, Springer, vol. 31(2), pages 77-86, April.
- Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Kwoka, John & Pollitt, Michael, 2010. "Do mergers improve efficiency? Evidence from restructuring the US electric power sector," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 645-656, November.
- Subhash Ray, 2004.
"Are Some Indian Bank Too Large? A Examination of Size Efficiency in Indian Banking,"
2004-28, University of Connecticut, Department of Economics.
- Subhash Ray, 2007. "Are some Indian banks too large? An examination of size efficiency in Indian banking," Journal of Productivity Analysis, Springer, vol. 27(1), pages 41-56, February.
- Rolf Fare & Shawna Grosskopf & Valentin Zelenyuk, 2008. "Aggregation of Nerlovian profit indicator," Applied Economics Letters, Taylor & Francis Journals, vol. 15(11), pages 845-847.
- Maindiratta, Ajay, 1990. "Largest size-efficient scale and size efficiencies of decision-making units in data envelopment analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 57-72.
- Banal-Estanol, Albert & Macho-Stadler, Ines & Seldeslachts, Jo, 2008. "Endogenous mergers and endogenous efficiency gains: The efficiency defence revisited," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 69-91, January.
- Roberto A. Weber & Colin F. Camerer, 2003. "Cultural Conflict and Merger Failure: An Experimental Approach," Management Science, INFORMS, vol. 49(4), pages 400-415, April.
- Troels Kristensen & Peter Bogetoft & Kjeld Pedersen, 2010. "Potential gains from hospital mergers in Denmark," Health Care Management Science, Springer, vol. 13(4), pages 334-345, December.
- R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
- Fare, Rolf & Zelenyuk, Valentin, 2003. "On aggregate Farrell efficiencies," European Journal of Operational Research, Elsevier, vol. 146(3), pages 615-620, May.
- Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
- Walter Briec & Benoit Dervaux & Hervé Leleu, 2003. "Aggregation of Directional Distance Functions and Industrial Efficiency," Journal of Economics, Springer, vol. 79(3), pages 237-261, 07.
- Fukuyama, Hirofumi, 2003. "Scale characterizations in a DEA directional technology distance function framework," European Journal of Operational Research, Elsevier, vol. 144(1), pages 108-127, January.
- Antonio Peyrache, 2014. "Cost Constrained Industry Ine," CEPA Working Papers Series WP042014, School of Economics, University of Queensland, Australia.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.