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: |
Web page: http://mpra.ub.uni-muenchen.de
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Valentin Zelenyuk, 2012.
"Aggregation of Scale Efficiency,"
CEPA Working Papers Series
WP042012, School of Economics, University of Queensland, Australia.
- Fare, Rolf & Zelenyuk, Valentin, 2003. "On aggregate Farrell efficiencies," European Journal of Operational Research, Elsevier, vol. 146(3), pages 615-620, May.
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