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Distinguishing technical and scale efficiency on non-convex and convex technologies: theoretical analysis and empirical illustrations

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  • KERSTENS , Kristiaan

    (LABORES, Université Catholique de Lille, B.P. 109, 60 Boulevard Vauban, F-59016 Lille Cédex, France)

  • VANDEN EECKAUT, Philippe

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

This paper defines a decomposition of technical efficiency for a series of nonparametric deterministic reference technologies related to the Free Disposal Hull. More specifically, introducing several returns to scale assumptionsinto this non-convex production model allows one to distinguish between technical and scale inefficiencies.These technologies and the resulting efficiency decomposition are illustrated with several data sets and contrasted with results based on the traditional, convex Data Envelopment Analysis models. In particular, data on UK rates departments are extensively analysed. Furthermore, samples of French urban transit companies and of Belgian municipalities serve to verify certain empirical regularities.

Suggested Citation

  • KERSTENS , Kristiaan & VANDEN EECKAUT, Philippe, 1998. "Distinguishing technical and scale efficiency on non-convex and convex technologies: theoretical analysis and empirical illustrations," CORE Discussion Papers 1998055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1998055
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1998.html
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    References listed on IDEAS

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    1. Kristiaan Kerstens, 1999. "Decomposing Technical Efficiency and Effectiveness of French Urban Transport," Annals of Economics and Statistics, GENES, issue 54, pages 129-155.
    2. Kerstens, Kristiaan & Vanden Eeckaut, Philippe, 1999. "Estimating returns to scale using non-parametric deterministic technologies: A new method based on goodness-of-fit," European Journal of Operational Research, Elsevier, vol. 113(1), pages 206-214, February.
    3. Ferrier, G. D. & Kerstens, K. & Vanden Eeckaut, P., 1994. "Radial and nonradial technical efficiency measures on a DEA reference technology: a comparison using US banking data," CORE Discussion Papers RP 1156, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Borger, Bruno De & Ferrier, Gary D. & Kerstens, Kristiaan, 1998. "The choice of a technical efficiency measure on the free disposal hull reference technology: A comparison using US banking data," European Journal of Operational Research, Elsevier, vol. 105(3), pages 427-446, March.
    5. Fare, Rolf & Grosskopf, Shawna, 1985. " Nonparametric Cost Approach to Scale Efficiency," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(4), pages 594-604.
    6. Fare,Rolf & Grosskopf,Shawna & Lovell,C. A. Knox, 2008. "Production Frontiers," Cambridge Books, Cambridge University Press, number 9780521072069, October.
    7. Fare, Rolf & Grosskopf, Shawna & Lovell, C A Knox, 1983. " The Structure of Technical Efficiency," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(2), pages 181-190.
    8. Dervaux, Benoît & Kerstens, Kristiaan & Vanden Eeckaut, Philippe, 1998. "Radial and nonradial static efficiency decompositions: a focus on congestion measurement," Transportation Research Part B: Methodological, Elsevier, vol. 32(5), pages 299-312, June.
    9. Kerstens, K., 1996. "Technical efficiency measurement and explanation of French urban transit companies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 30(6), pages 431-452, November.
    10. Tulkens, Henry & Vanden Eeckaut, Philippe, 1995. "Non-parametric efficiency, progress and regress measures for panel data: Methodological aspects," European Journal of Operational Research, Elsevier, vol. 80(3), pages 474-499, February.
    11. Knox Lovell, C. A., 1995. "Measuring the macroeconomic performance of the Taiwanese economy," International Journal of Production Economics, Elsevier, vol. 39(1-2), pages 165-178, April.
    12. Ferrier, Gary D. & Lovell, C. A. Knox, 1990. "Measuring cost efficiency in banking : Econometric and linear programming evidence," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 229-245.
    13. De Borger, Bruno & Kerstens, Kristiaan, 1996. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA, and econometric approaches," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 145-170, April.
    14. Niels Christian Petersen, 1990. "Data Envelopment Analysis on a Relaxed Set of Assumptions," Management Science, INFORMS, vol. 36(3), pages 305-314, March.
    15. Chang, Kuo-Ping & Guh, Yeah-Yuh, 1991. "Linear production functions and the data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 52(2), pages 215-223, May.
    16. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    17. DEPRINS, Dominique & SIMAR, Léopold, 1983. "On Farrell measures of technical efficiency," CORE Discussion Papers RP 589, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    18. repec:cor:louvrp:-571 is not listed on IDEAS
    19. Fukuyama, Hirofumi, 1996. "Returns to scale and efficiency of credit associations in Japan: A nonparametric frontier approach," Japan and the World Economy, Elsevier, vol. 8(3), pages 259-277, September.
    20. VANDEN EECKAUT, Philippe & TULKENS, Henry & JAMAR, Marie-Astrid, 1993. "Cost efficiency in Belgian municipalities," CORE Discussion Papers RP 1033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    21. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
    22. TULKENS, Henry & MALNERO, Amador, 1994. "Nonparametric Approaches to the Assessment of the Relative Efficiency of Bank Branches," CORE Discussion Papers 1994047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    23. Fare, Rolf & Grosskopf, Shawna, 1995. "Nonparametric tests of regularity, Farrell efficiency, and goodness-of-fit," Journal of Econometrics, Elsevier, vol. 69(2), pages 415-425, October.
    24. Banker, Rajiv D. & Chang, Hsihui & Cooper, William W., 1996. "Equivalence and implementation of alternative methods for determining returns to scale in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 89(3), pages 473-481, March.
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    Citations

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    Cited by:

    1. François Mairesse & Philippe Vanden Eeckaut, 2002. "Museum Assessment and FDH Technology: Towards a Global Approach," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 26(4), pages 261-286, November.
    2. Maria Alberta Oliveira & Carlos Santos, 2005. "Assessing school efficiency in Portugal using FDH and bootstrapping," Applied Economics, Taylor & Francis Journals, vol. 37(8), pages 957-968.
    3. Kuosmanen, Timo, 2001. "DEA with efficiency classification preserving conditional convexity," European Journal of Operational Research, Elsevier, vol. 132(2), pages 326-342, July.
    4. MAIRESSE, François & VANDEN EECKAUT, Philippe, 1999. "Museum assessment and FDH technology: a global approach," CORE Discussion Papers 1999038, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Kristiaan Kerstens & Philippe Vanden Eeckaut, 1999. "A new criterion for technical efficiency measures: non-monotonicity across dimensions axioms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 45-59.
    6. Post, Thierry, 2001. "Transconcave data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 132(2), pages 374-389, July.
    7. repec:spr:stmapp:v:11:y:2002:i:1:d:10.1007_bf02511449 is not listed on IDEAS

    More about this item

    Keywords

    Decomposition of technical efficiency; FDH; DEA;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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