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Cost and productivity

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Author Info
E. Grifell-Tatjé (Departament d'Economia de l'Empresa, Universitat Autònoma de Barcelona, 08193 Bellaterra, Barcelona, Spain)
C.A.K. Lovell (Department of Economics, Terry College of Business, University of Georgia, Athens, GA, USA)
Abstract

This study develops an analytical model capable of decomposing both intertemporal and multilateral cost variation. It begins by attributing cost variation to a price effect and a quantity effect. Then the quantity effect is decomposed into a productivity effect and an activity effect. The productivity effect in turn decomposes into a cost efficiency effect and, in the intertemporal context, a technical change effect. This paper also shows how the intertemporal and multilateral cost decompositions can be implemented, using linear programming techniques. These techniques offer certain advantages over conventional econometric techniques whenever a substantial portion of cost variation is due to variation in cost efficiency. The two cost decompositions are illustrated with a pair of benchmarking exercises based on a panel of 93 US electric power generating companies, in which variation in cost efficiency does play a key role. Copyright © 2000 John Wiley & Sons, Ltd.

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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 21 (2000)
Issue (Month): 1 ()
Pages: 19-30
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:mgtdec:v:21:y:2000:i:1:p:19-30

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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References listed on IDEAS
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.:

  1. Stevenson, Rodney E., 1980. "Likelihood functions for generalized stochastic frontier estimation," Journal of Econometrics, Elsevier, vol. 13(1), pages 57-66, May. [Downloadable!] (restricted)
  2. Greene, William H., 1980. "Maximum likelihood estimation of econometric frontier functions," Journal of Econometrics, Elsevier, vol. 13(1), pages 27-56, May. [Downloadable!] (restricted)
  3. Schmidt, Peter & Knox Lovell, C. A., 1979. "Estimating technical and allocative inefficiency relative to stochastic production and cost frontiers," Journal of Econometrics, Elsevier, vol. 9(3), pages 343-366, February. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. Gollop, Frank M & Karlson, Stephen H, 1978. "The Impact of the Fuel Adjustment Mechanism on Economic Efficiency," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 574-84, November. [Downloadable!] (restricted)
  6. Kumbhakar, Subal C., 1997. "Modeling allocative inefficiency in a translog cost function and cost share equations: An exact relationship," Journal of Econometrics, Elsevier, vol. 76(1-2), pages 351-356. [Downloadable!] (restricted)
  7. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-98, October. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Leticia Blázquez Gómez & Emili Grifell-Tatjé, 2004. "Regulación de la Distribución Eléctrica en España: Análisis Económico de una Década, 1987-1997," Working Papers 200401, Department of Business Economics, Universitat Autonoma de Barcelona. [Downloadable!]
  2. Robert Chambers, 2008. "Stochastic productivity measurement," Journal of Productivity Analysis, Springer, vol. 30(2), pages 107-120, October. [Downloadable!] (restricted)
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