On Mr. Farrell's Decomposition and Aggregation
AbstractIn this paper we show that in order to aggregate individual efficiency scores into a group (e.g., industry) efficiency score, in such a way that the multiplicative structure of further decompositions is preserved with equal weights across components, the weighted geometric mean is required. We also show how the weights can be chosen using a variation of a theorem by Koopmans (1957). In the end, our paper provides a mathematically consistent and economic-theory justified way of aggregation of Farrell-type efficiency scores.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 28005.
Date of creation: Jun 2002
Date of revision: 23 May 2005
Publication status: Published in International Journal of Business and Economics 2.4(2005): pp. 167-171
Farrell efficiency; Index Aggregation;
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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- Fare, Rolf & Zelenyuk, Valentin, 2003. "On aggregate Farrell efficiencies," European Journal of Operational Research, Elsevier, vol. 146(3), pages 615-620, May.
- Valentin Zelenyuk, 2012. "Aggregation of Scale Efficiency," CEPA Working Papers Series WP042012, School of Economics, University of Queensland, Australia.
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