On Mr. Farrell's Decomposition and Aggregation
In this paper we show that in order to aggregate individual efficiency scores into a group (e.g., industry) efficiency score, in such a way that the multiplicative structure of further decompositions is preserved with equal weights across components, the weighted geometric mean is required. We also show how the weights can be chosen using a variation of a theorem by Koopmans (1957). In the end, our paper provides a mathematically consistent and economic-theory justified way of aggregation of Farrell-type efficiency scores.
|Date of creation:||Jun 2002|
|Date of revision:||23 May 2005|
|Publication status:||Published in International Journal of Business and Economics 2.4(2005): pp. 167-171|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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- Fare, Rolf & Zelenyuk, Valentin, 2003. "On aggregate Farrell efficiencies," European Journal of Operational Research, Elsevier, vol. 146(3), pages 615-620, May.
- Valentin Zelenyuk, 2012.
"Aggregation of Scale Efficiency,"
CEPA Working Papers Series
WP042012, School of Economics, University of Queensland, Australia.
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