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Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions

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  • Bruno De Borger
  • Kristiaan Kerstens
  • Diego Prior
  • Ignace Van de Woestyne

Abstract

Starting from existing static decompositions of overall economic efficiency on non-parametric production and cost frontiers, this paper proposes more comprehensive decompositions including several cost-based notions of capacity utilisation. Furthermore, in case prices are lacking, we develop additional decompositions of overall technical efficiency integrating a technical concept of capacity utilisation. These new efficiency decompositions provide a link between short and long run economic analysis and, in empirical work, avoid conflating inefficiency and differences in capacity utilisation. An empirical analysis using a monthly panel of Chilean hydro-electric power plants illustrates the potential of these decomposition proposals.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 45 (2013)
Issue (Month): 24 (August)
Pages: 3529-3529

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Handle: RePEc:taf:applec:v:45:y:2013:i:24:p:3529-3529

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