On the Commensurability of Directional Distance Functions
AbstractShephard’s distance functions are widely used instruments for characterizing technology and for estimating efficiency in contemporary economic theory and practice. Recently, they have been generalized by the Luenberger shortage function, or Chambers-Chung-Färe directional distance function. In this study, we explore a very important property of an economic measure known as commensurability or independence of units of measurement up to scalar transformation. Our study discovers both negative and positive results for this property in the context of the directional distance function, which in turn helps us narrow down the most critical issue for this function in practice—the choice of direction of measurement.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7068.
Date of creation: 2005
Date of revision:
Directional distance functions; commensurability; efficiency;
Find related papers by JEL classification:
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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