A Shadow Price Approach to Technical Efficiency Measurement
AbstractThe axiomatic literature on technical efficiency measurement has drawn attention to the indication problem of the Debreu-Farrell (DF) measure. We follow a shadow price approach to preserve the DF benchmark while reconciling it with the Koopmans efficiency characterization. First, we define a set of Koopmans efficient references that can be rationalized in a similar way as the DF projection. The indication problem is then captured using a measure of implicit allocative or mix efficiency, also interpretable as a dominance measure in price space. We consequently present a mix-adjusted DF framework for efficiency measurement in which e.g. the Zieschang (1984) procedure can be fitted.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics in its series Public Economics Working Paper Series with number ces9924.
Length: 20 pp.
Date of creation: 1999
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Note: A profoundly revised version of this paper is available under the title "Technical Efficiency Evaluation: Naturally Dual;" see http://ideas.repec.org/p/wpe/papers/wptchff.html.
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- Laurens CHERCHYE & Tom VAN PUYENBROECK, 1999. "A Shadow Price Approach to Technical Efficiency Measurement," Center for Economic Studies - Discussion papers ces9924, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
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