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

  • KERSTENSÂ , 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)

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.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1998055.

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Date of creation: 01 Jun 1998
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Handle: RePEc:cor:louvco:1998055
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  1. KERSTENS, Kristiaan & VANDEN EECKAUT, Philippe, 1997. "Estimating returns to scale using nonparametric deterministic technologies : a new method based on goodness-of-fit," CORE Discussion Papers 1997013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. 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.
  3. Fare, Rolf & Grosskopf, Shawna & Lovell, C A Knox, 1983. " The Structure of Technical Efficiency," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(2), pages 181-90.
  4. 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.
  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. 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.
  7. repec:cor:louvrp:-571 is not listed on IDEAS
  8. 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.
  9. 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.
  10. 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.
  11. Dominique DEPRINS & Léopold Simar, 1983. "On Farrell Measures of Technical Efficiency," Discussion Papers (REL - Recherches Economiques de Louvain) 1983022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  12. Gary D. FERRIER & Kristiaan KERSTENS & Philippe VANDEN EECKAUT, 1994. "Radial and Nonradial Technical Efficiency Measures on DEA Reference Technology : A Comparison Using US Banking Data," Discussion Papers (REL - Recherches Economiques de Louvain) 1994043, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  13. 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).
  14. 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.
  15. 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.
  16. Niels Christian Petersen, 1990. "Data Envelopment Analysis on a Relaxed Set of Assumptions," Management Science, INFORMS, vol. 36(3), pages 305-314, March.
  17. 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.
  18. 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.
  19. 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.
  20. 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.
  21. 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.
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