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Static efficiency decompositions and capacity utilisation : integrating economic and technical capacity notions

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  • B. de Borger
  • K. Kerstens

    (UMR CNRS 8179 - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

  • D. Prior

Abstract

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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  • B. de Borger & K. Kerstens & D. Prior, 2007. "Static efficiency decompositions and capacity utilisation : integrating economic and technical capacity notions," Post-Print hal-00296708, HAL.
    • Handle: RePEc:hal:journl:hal-00296708
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    Cited by:

    1. Yao-yao Song & Xian-tong Ren & Guo-liang Yang, 2023. "Capacity utilization change over time," Journal of Productivity Analysis, Springer, vol. 59(1), pages 61-78, February.
    2. Giovanni Cesaroni & Kristiaan Kerstens & Ignace Van de Woestyne, 2017. "A New Input-Oriented Plant Capacity Notion: Definition and Empirical Comparison," Pacific Economic Review, Wiley Blackwell, vol. 22(4), pages 720-739, October.
    3. Cesaroni, Giovanni & Kerstens, Kristiaan & Van de Woestyne, Ignace, 2019. "Short- and long-run plant capacity notions: Definitions and comparison," European Journal of Operational Research, Elsevier, vol. 275(1), pages 387-397.
    4. Dale Squires & Kathleen Segerson, 2022. "Capacity and Capacity Utilization in Production Economics," Springer Books, in: Subhash C. Ray & Robert G. Chambers & Subal C. Kumbhakar (ed.), Handbook of Production Economics, chapter 24, pages 1001-1037, Springer.
    5. Kerstens, Kristiaan & Sadeghi, Jafar & Van de Woestyne, Ignace, 2019. "Convex and nonconvex input-oriented technical and economic capacity measures: An empirical comparison," European Journal of Operational Research, Elsevier, vol. 276(2), pages 699-709.
    6. Kristiaan KERSTENS & Xiaoqing CHEN, 2022. "Evaluating Horizontal Mergers in Swedish District Courts Using Plant Capacity Concepts: With a Focus on Nonconvexity," Working Papers 2022-EQM-02, IESEG School of Management.
    7. W. Erwin Diewert & Kevin J. Fox, 2018. "A decomposition of US business sector TFP growth into technical progress and cost efficiency components," Journal of Productivity Analysis, Springer, vol. 50(1), pages 71-84, October.

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