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Modelling and Measuring Technical Efficiency: An Alternative Approach

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  • Kalirajan, K.P.
  • Shand, R.T.

Abstract

In the literature, technical efficiency is measured as the ratio of observed output to potential output. Although there is no a priori theoretical reasoning, in the stochastic framework of measuring technical efficiency, the potential output is defined as a neutral shift from the observed output. The objective in this paper is to suggest a method to measure technical efficiency without having to consider the potential output as a neutral shift from the observed output.

Suggested Citation

  • Kalirajan, K.P. & Shand, R.T., 1997. "Modelling and Measuring Technical Efficiency: An Alternative Approach," 1997 Occasional Paper Series No. 7 198062, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaaeo7:198062
    DOI: 10.22004/ag.econ.198062
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    References listed on IDEAS

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    1. Maddala, G S, 1971. "The Use of Variance Components Models in Pooling Cross Section and Time Series Data," Econometrica, Econometric Society, vol. 39(2), pages 341-358, March.
    2. Bauer, Paul W., 1990. "Recent developments in the econometric estimation of frontiers," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 39-56.
    3. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    4. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    5. Breusch, Trevor S., 1987. "Maximum likelihood estimation of random effects models," Journal of Econometrics, Elsevier, vol. 36(3), pages 383-389, November.
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