Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions
Starting from existing static decompositions of overall economic efficiency on non parametric production and cost frontiers, this paper proposes more comprehensive decompositions including several cost based notions of capacity utilisation. Furthermore, in case prices are lacking, we develop additional decompositions of overall technical efficiency integrating a technical concept of capacity utilisation. These new efficiency decompositions provide a link between short and long run economic analysis and, in empirical work, avoid conflating inefficiency and differences in capacity utilisation. An empirical analysis using a monthly panel of Chilean hydro-electric power plants illustrates the potential of these decomposition proposals.
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Volume (Year): 45 (2013)
Issue (Month): 24 (August)
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