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Measuring potential gains from specialization under non-convex technologies


  • Stéphane Blancard


  • Jean-Philippe Boussemart

    (University of Lille 3, LEM-CNRS (UMR 8179), IESEG School of Management)

  • Hervé Leleu

    (LEM-CNRS (UMR 8179), IESEG School of Management)


In this paper, the Free Coordination Hull (FCH) approach developed by Green and Cook (2004) is combined with the Free Disposal Hull (FDH) model to detect potential gains from specialization. As a non-convex approach that allows both directly observed and summed decision making units (DMUs) to define the production technology, FCH is the relevant model for analyzing optimal reapportionment of activity among smaller and more specialized units. Indeed the convexity assumption in more traditional Data Envelopment Analysis (DEA) models precludes the possibility of detecting potential gains from specialization and can only reveal economies of scope. Therefore non-convex technologies are required to model diseconomies of scope. Based on FDH and FCH technologies, an overall efficiency measure is decomposed into three components, namely technical, size and specialization efficiencies. A database of French farms for the year 2003 is used for illustration. Results indicate that input inefficiency in the agricultural sector is driven mainly by lack of specialization, which represents about 50% of overall inefficiency.

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  • Stéphane Blancard & Jean-Philippe Boussemart & Hervé Leleu, 2009. "Measuring potential gains from specialization under non-convex technologies," Working Papers 2009-ECO-02, IESEG School of Management.
  • Handle: RePEc:ies:wpaper:e200902

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    References listed on IDEAS

    1. Banker, Rajiv D., 1984. "Estimating most productive scale size using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 17(1), pages 35-44, July.
    2. Maindiratta, Ajay, 1990. "Largest size-efficient scale and size efficiencies of decision-making units in data envelopment analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 57-72.
    3. M. J. Farrell, 1959. "The Convexity Assumption in the Theory of Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 67, pages 377-377.
    4. Wu, Shunxiang & Prato, Anthony A., 2006. "Cost Efficiency and Scope Economies of Crop and Livestock Farms in Missouri," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(03), December.
    5. Wu, Shunxiang & Prato, Tony, 2006. "Cost Efficiency and Scope Economies of Crop and Livestock Farms in Missouri," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 38(03), pages 539-553, December.
    6. Peter Bogetoft & Dexiang Wang, 2005. "Estimating the Potential Gains from Mergers," Journal of Productivity Analysis, Springer, vol. 23(2), pages 145-171, May.
    7. repec:cor:louvrp:-571 is not listed on IDEAS
    8. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
    9. Panzar, John C & Willig, Robert D, 1981. "Economies of Scope," American Economic Review, American Economic Association, vol. 71(2), pages 268-272, May.
    10. Chavas, Jean-Paul & Aliber, Michael, 1993. "An Analysis Of Economic Efficiency In Agriculture: A Nonparametric Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(01), July.
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    Cited by:

    1. Chang, Juin-Jen & Lai, Ching-Chong & Liao, Chih-Hsing, 2017. "Welfare Cost of Inflation: The Role of Price Markups and Increasing Returns to Production Specialization," MPRA Paper 77753, University Library of Munich, Germany.
    2. Blancard, Stéphane & Boussemart, Jean-Philippe & Chavas, Jean-Paul & Leleu, Hervé, 2016. "Potential gains from specialization and diversification further to the reorganization of activities," Omega, Elsevier, vol. 63(C), pages 60-68.
    3. Mark Müser & Harald Dyckhoff, 2017. "Quality splitting in waste incineration due to non-convex production possibilities," Journal of Business Economics, Springer, vol. 87(1), pages 73-96, January.
    4. Kwansoo Kim & Donghwan An, 2015. "Nonparametric Evaluation of Economies of Scope in the Context of Technical Efficiency: The Case of Rice and Vegetable Farms in Korea," Asian Economic Journal, East Asian Economic Association, vol. 29(3), pages 285-301, September.

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    specialization; free coordination hull; free disposal hull; agriculture;

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