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Translation efficiency and directionally optimal scale

Author

Listed:
  • Rolf Färe

    (Oregon State University
    University of Maryland)

  • Giannis Karagiannis

    (University of Macedonia)

Abstract

The aim of this paper is to show that instead of choosing the benchmark technology solely by means of maximal average productivities, a new whole range of options is opened up by using for this purpose the direction vector. By choosing any particular direction vector to evaluate technical efficiency we in fact predetermine by means of the relevant reflection vector the ray of average productivities we want to achieve. Then we may measure the extent of producing an inefficiently small (large) output by means of what we refer to as translation efficiency by comparing the average productivities of the projection of the observed input–output combination onto the best practice frontier and that of the graph translation homothetic technology. We can also determine the optimal production scale, which we refer to as directionally optimal scale, and which is defined conditionally on this vector of average productivities.

Suggested Citation

  • Rolf Färe & Giannis Karagiannis, 2023. "Translation efficiency and directionally optimal scale," Journal of Economics, Springer, vol. 140(3), pages 259-273, December.
    • Handle: RePEc:kap:jeczfn:v:140:y:2023:i:3:d:10.1007_s00712-023-00837-8
    DOI: 10.1007/s00712-023-00837-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Directional distance functions; Scale efficeincy; Translation effcieincy; Optimal scale;
    All these keywords.

    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

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