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The Theory of Benchmarking and the Measurement of Industrial Organization


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  • Raa, T. ten

    (Tilburg University, Center for Economic Research)

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    If more productive firms grow relatively fast, an industry performs better, even when no firm exhibits technical or efficiency change.In other words, the two well-known sources of productivity growth-technology and efficiency-can be augmented by a third one, namely the industrial organization effect.In this paper the efficiency of an industrial organization and its contribution to performance are measured by benchmarking all firms on the industry.More precisely, efficiency is measured by the proximity between a firm and the best practices.Aggregation of firm efficiencies is imperfect.The bias is used to measure the efficiency of the industrial organization.In benchmarking, change transmitted by a firm represents productivity growth and change transmitted by the best practices represents technical change.Although I use a nonparametric framework, which requires only input and output information, duality analysis reveals the Solow residual.In discrete time Malmquist indices capture the measurement of the industrial organization effect, efficiency changes, and technical change.The industrial organization of Japanese banking is analyzed.

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    Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2006-53.

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    Date of creation: 2006
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    Handle: RePEc:dgr:kubcen:200653

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    Keywords: Industrail organization; Efficiency; Aggregation; Productivity;

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    1. Raa, M.H. ten, 1995. "The substitution theorem," Open Access publications from Tilburg University urn:nbn:nl:ui:12-381858, Tilburg University.
    2. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
    3. Blackorby, C. & Russell, R.R., 1996. "Aggregation of Efficiency Indices," G.R.E.Q.A.M. 96a25, Universite Aix-Marseille III.
    4. Raa Thijs Ten, 1995. "The Substitution Theorem," Journal of Economic Theory, Elsevier, vol. 66(2), pages 632-636, August.
    5. Raa, T. ten & Shestalova, V., 2006. "Alternative Measures of Total Factor Productivity Growth," Discussion Paper 2006-54, Tilburg University, Center for Economic Research.
    6. Dale Jorgenson & Mun Ho & Kevin Stiroh, 2003. "Growth of US Industries and Investments in Information Technology and Higher Education," Economic Systems Research, Taylor & Francis Journals, vol. 15(3), pages 279-325.
    7. ten Raa,Thijs, 2006. "The Economics of Input-Output Analysis," Cambridge Books, Cambridge University Press, number 9780521602679, October.
    8. Thijs Raa, 2005. "Aggregation of Productivity Indices: The Allocative Efficiency Correction," Journal of Productivity Analysis, Springer, vol. 24(2), pages 203-209, October.
    9. Fukuyama, Hirofumi & Weber, William L., 2002. "Estimating output allocative efficiency and productivity change: Application to Japanese banks," European Journal of Operational Research, Elsevier, vol. 137(1), pages 177-190, February.
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