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A Generalized Distance Function and the Analysis of Production Efficiency

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  • Jean-Paul Chavas
  • Thomas L. Cox

Abstract

A generalization of Shephard’s distance functions is proposed, extending the usefulness of distance functions in economic analysis. Applications to efficiency measurements and productivity analysis are presented. New indexes of productivity and technical, allocative, and scale efficiency are proposed and analyzed. Interpretation of these indexes in terms of ray-average cost, ray-average revenue, and cost-to-revenue ratio is discussed.

Suggested Citation

  • Jean-Paul Chavas & Thomas L. Cox, 1999. "A Generalized Distance Function and the Analysis of Production Efficiency," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 294-318, October.
  • Handle: RePEc:sej:ancoec:v:66:2:y:1999:p:294-318
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    Cited by:

    1. Pastor, Jesus T. & Zofio, Jose L., 2017. "Can Farrell's allocative efficiency be generalized by the directional distance function approach?Author-Name: Aparicio, Juan," European Journal of Operational Research, Elsevier, vol. 257(1), pages 345-351.
    2. repec:pal:jorsoc:v:59:y:2008:i:6:d:10.1057_palgrave.jors.2602392 is not listed on IDEAS
    3. Boussemart, Jean-Philippe & Briec, Walter & Peypoch, Nicolas & Tavéra, Christophe, 2009. "[alpha]-Returns to scale and multi-output production technologies," European Journal of Operational Research, Elsevier, vol. 197(1), pages 332-339, August.
    4. Silva Portela, Maria Conceicao A. & Thanassoulis, Emmanuel, 2005. "Profitability of a sample of Portuguese bank branches and its decomposition into technical and allocative components," European Journal of Operational Research, Elsevier, vol. 162(3), pages 850-866, May.
    5. Cheng, Gang & Zervopoulos, Panagiotis D., 2014. "Estimating the technical efficiency of health care systems: A cross-country comparison using the directional distance function," European Journal of Operational Research, Elsevier, vol. 238(3), pages 899-910.
    6. Walter Briec & Kristiaan Kerstens & Philippe Venden Eeckaut, 2004. "Non-convex Technologies and Cost Functions: Definitions, Duality and Nonparametric Tests of Convexity," Journal of Economics, Springer, vol. 81(2), pages 155-192, February.
    7. Pablo Arocena & Ariadna García-Prado, 2007. "Accounting for quality in the measurement of hospital performance: evidence from Costa Rica," Health Economics, John Wiley & Sons, Ltd., vol. 16(7), pages 667-685.
    8. Jose Zofio & Jesus Pastor & Juan Aparicio, 2013. "The directional profit efficiency measure: on why profit inefficiency is either technical or allocative," Journal of Productivity Analysis, Springer, vol. 40(3), pages 257-266, December.
    9. Walter Briec & Kristiaan Kerstens, 2008. "Infeasibility and Directional Distance Functions with Application to the Determinateness of the Luenberger Productivity Indicator," Working Papers 2008-ECO-11, IESEG School of Management.
    10. repec:spr:scient:v:94:y:2013:i:1:d:10.1007_s11192-012-0763-0 is not listed on IDEAS
    11. Gelaw, Fekadu, 2013. "Inefficiency and Incapability Gaps as Causes of Poverty: A Poverty Line-Augmented Efficiency Analysis Using Stochastic Distance Function," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 8(2), August.
    12. Aparicio, Juan & Pastor, Jesús & Zofío, José Luis, 2014. "Is the directional distance function a complete generalization of the Farrell approach?," Working Papers in Economic Theory 2014/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    13. Jiménez, Fernando & Zabala Iturriagagoitia, Jon Mikel & Zofío, José Luis, 2007. "Efficiency in Public Research Centers: Evaluating the Spanish Food Technology Program," Working Papers in Economic Theory 2007/04, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    14. José Zofío & Angel Prieto, 2006. "Return to Dollar, Generalized Distance Function and the Fisher Productivity Index," Spanish Economic Review, Springer;Spanish Economic Association, vol. 8(2), pages 113-138, June.
    15. Dalton, Timothy J., 2004. "Indivisible And Spatial Components Of Dairy Firm Efficiency," 2004 Annual meeting, August 1-4, Denver, CO 20320, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Subhash C. Ray, 2004. "The Directional Distance Function and Measurement of Super-Efficiency: An Application to Airlines Data," Working papers 2004-16, University of Connecticut, Department of Economics.
    17. Cesaroni, Giovanni & Giovannola, Daniele, 2015. "Average-cost efficiency and optimal scale sizes in non-parametric analysis," European Journal of Operational Research, Elsevier, vol. 242(1), pages 121-133.
    18. Silva, Elvira & Lansink, Alfons Oude & Stefanou, Spiro E., 2015. "The adjustment-cost model of the firm: Duality and productive efficiency," International Journal of Production Economics, Elsevier, vol. 168(C), pages 245-256.
    19. Massuanganhe, Israel Jacob, 2008. "Policies, Natural Resource Governance and Local Development," Ph.D Degree Theses 53061, University of the Free State, Department of Agricultural Economics.
    20. Jiménez-Sáez, Fernando & Zabala-Iturriagagoitia, Jon Mikel & Zofío, José L. & Castro-Martínez, Elena, 2011. "Evaluating research efficiency within National R&D Programmes," Research Policy, Elsevier, vol. 40(2), pages 230-241, March.
    21. Laurens Cherchye & Timo Kuosmanen & Thierry Post, 2001. "FDH Directional Distance Functions with an Application to European Commercial Banks," Journal of Productivity Analysis, Springer, vol. 15(3), pages 201-215, January.
    22. repec:pal:jorsoc:v:60:y:2009:i:11:d:10.1057_jors.2009.71 is not listed on IDEAS
    23. Elvira Silva & Alfons Oude Lansink, 2013. "Dynamic Efficiency Measurement: A Directional Distance Function Approach," CEF.UP Working Papers 1307, Universidade do Porto, Faculdade de Economia do Porto.
    24. repec:wsi:ijitdm:v:16:y:2017:i:04:n:s0219622014400021 is not listed on IDEAS
    25. Timo Kuosmanen & Timo Sipiläinen, 2009. "Exact decomposition of the Fisher ideal total factor productivity index," Journal of Productivity Analysis, Springer, vol. 31(3), pages 137-150, June.

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