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Aggregation of directional distance functions and industrial efficiency

Author

Listed:
  • Walter Briec

    (UPVD - Université de Perpignan Via Domitia)

  • Benoît Dervaux

  • Hervé Leleu

    (LEM - Laboratoire d'Economie et de Management - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

Abstract

Three main objectives are pursued in this paper. First, we intend to analyze the aggregation problem of directional distance functions from a constructive viewpoint. We provide necessary and sufficient conditions concerning the structural properties of the production technology and of the nature of groups of firms. Indeed, exact additive aggregation holds for a linear technology and for a direction solely defined in the output space. Second, since these conditions are somewhat restrictive, we are interested in providing a measure for the aggregation bias through the relationship between industrial and structural technical efficiency. Finally, we show that this aggregation bias is a lower bound for industrial allocative efficiency.

Suggested Citation

  • Walter Briec & Benoît Dervaux & Hervé Leleu, 2003. "Aggregation of directional distance functions and industrial efficiency," Post-Print hal-05623464, HAL.
    • Handle: RePEc:hal:journl:hal-05623464
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