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Dynamic Efficiency Measurement: A Directional Distance Function Approach

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  • Elvira Silva

    ()
    (Faculdade de Economia do Porto, cef.up, University of Porto)

  • Alfons Oude Lansink

    ()
    (Department of Social Sciences, Wageningen University)

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    Abstract

    A dynamic directional input distance function is proposed within the adjustment-cost model of the firm, generalizing the directional distance function developed by Chambers, Chung and Färe (1996) in the static context. Duality is established between the dynamic directional distance function and the optimal current value function of the intertemporal cost minimization problem. Dynamic input efficiency measures are generated from the dynamic directional input distance function and intertemporal duality. These efficiency measures indicate the firm’s degree of efficiency at a point along its adjustment path. The dynamic efficiency measures are illustrated on panel data of Dutch glasshouse horticulture firms using a nonparametric approach. Keywords and Phrases: adjustment-cost technology, dynamic directional input distance function, dynamic duality, dynamic cost efficiency.

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    Bibliographic Info

    Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1307.

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    Length: 43 pages
    Date of creation: May 2013
    Date of revision:
    Handle: RePEc:por:cetedp:1307

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    Keywords: adjustment-cost technology; dynamic directional input distance function; dynamic duality; dynamic cost efficiency;

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