Dynamic Efficiency Measurement: A Directional Distance Function Approach
AbstractA 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 InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1307.
Length: 43 pages
Date of creation: May 2013
Date of revision:
adjustment-cost technology; dynamic directional input distance function; dynamic duality; dynamic cost efficiency;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
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