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Process Aggregation and Efficiency

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  • Bogetoft, Peter

Abstract

We analyse how the aggregation of production processes affects efficiency evaluations. A production unit can be inefficient even though all its production processes are efficient. We show how to test if observed "inefficiencies" may be caused by an aggregation and how to correct efficiency measures for such aggregation generated inefficiencies. The tests and the adjusted efficiency measurement programs involve hypothetical dis-aggregations designed to put the evaluated unit in its best possible light.

Suggested Citation

  • Bogetoft, Peter, 1999. "Process Aggregation and Efficiency," Unit of Economics Working Papers 24190, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
    • Handle: RePEc:ags:rvaewp:24190
    DOI: 10.22004/ag.econ.24190
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    File URL: https://ageconsearch.umn.edu/record/24190/files/wp990004.pdf
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    References listed on IDEAS

    as
    1. Peter Bogetoft & Jens Hougaard, 1999. "Efficiency Evaluations Based on Potential (Non-Proportional) Improvements," Journal of Productivity Analysis, Springer, vol. 12(3), pages 233-247, November.
    2. Luenberger, David G., 1992. "Benefit functions and duality," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 461-481.
    3. Boaz Golany, 1988. "Note---A Note on Including Ordinal Relations Among Multipliers in Data Envelopment Analysis," Management Science, INFORMS, vol. 34(8), pages 1029-1033, August.
    4. Peter Bogetoft & Dexiang Wang, 2005. "Estimating the Potential Gains from Mergers," Journal of Productivity Analysis, Springer, vol. 23(2), pages 145-171, May.
    5. Bogetoft, Peter, 1995. "Incentives and productivity measurements," International Journal of Production Economics, Elsevier, vol. 39(1-2), pages 67-77, April.
    6. Chambers, Robert G., 1995. "Benefit and Distance Functions," Working Papers 197820, University of Maryland, Department of Agricultural and Resource Economics.
    7. 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.
    8. Agha Iqbal Ali & Wade D. Cook & Lawrence M. Seiford, 1991. "Strict vs. Weak Ordinal Relations for Multipliers in Data Envelopment Analysis," Management Science, INFORMS, vol. 37(6), pages 733-738, June.
    9. Charnes, A. & Cooper, W. W. & Rhodes, E., 1979. "Measuring the efficiency of decision-making units," European Journal of Operational Research, Elsevier, vol. 3(4), pages 339-338, July.
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    Cited by:

    1. Peter Bogetoft & Dexiang Wang, 2005. "Estimating the Potential Gains from Mergers," Journal of Productivity Analysis, Springer, vol. 23(2), pages 145-171, May.
    2. Bogetoft, Peter & Wang, Dexiang, 1999. "Estimating the Potential Gains from Mergers: The Danish Agricultural Extension Services," Unit of Economics Working Papers 24207, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.

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