Nonparametric Measures of Scale Economies and Capacity Utilization: An Application to U.S. Manufacturing
An economic measure of scale efficiency is the ratio of the minimum average cost to the average cost at the actual output level of a firm. It is easily measured by the ratio of the total cost of this output under the constant and variable returns to scale assumptions. This procedure does not identify the output level where the average cost reaches a minimum. This paper proposes a nonparametric method of measuring this output level using DEA. The relation between this efficient production scale, the short run physical capacity output, and the most productive scale size (MPSS) is also discussed. An empirical application using state level data from U.S. manufacturing is used to illustrate the procedure.
|Date of creation:||Mar 2013|
|Contact details of provider:|| Postal: University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063|
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
More information through EDIRC
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.:
- Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
- Fare, Rolf & Grosskopf, Shawna & Kirkley, Jim, 2000. "Multi-output Capacity Measures and Their Relevance for Productivity," Bulletin of Economic Research, Wiley Blackwell, vol. 52(2), pages 101-112, April.
- Lindebo, Erik & Hoff, Ayoe & Vestergaard, Niels, 2007. "Revenue-based capacity utilisation measures and decomposition: The case of Danish North Sea trawlers," European Journal of Operational Research, Elsevier, vol. 180(1), pages 215-227, July.
- Léopold Simar & Paul W. Wilson, 1998.
"Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models,"
INFORMS, vol. 44(1), pages 49-61, January.
- Simar, L. & Wilson, P.W., "undated". "Sensitivity analysis of efficiency scores: how to bootstrap in nonparametric frontier models," CORE Discussion Papers RP 1304, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- SIMAR, Léopold & WILSON, Paul, 1995. "Sensitivity Analysis to Efficiency Scores : How to Bootstrap in Nonparametric Frontier Models," CORE Discussion Papers 1995043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Coelli, Tim & Grifell-Tatje, Emili & Perelman, Sergio, 2002.
"Capacity utilisation and profitability: A decomposition of short-run profit efficiency,"
International Journal of Production Economics,
Elsevier, vol. 79(3), pages 261-278, October.
- Coelli, Tim & Grifell-Tatje, Emili & Perelman, Sergio, 2002. "Capacity Utilization and Profitability: A Decomposition of Short Run Profit Efficiency," Efficiency Series Papers 2002/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
- COELLI, Tim & GRIFELL-TATJE, Emili & PERELMAN, Sergio, 2001. "Capacity utilisation and profitability: a decomposition of short run profit efficiency," CORE Discussion Papers 2001052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dupont, Diane P. & Grafton, R. Quentin & Kirkley, James & Squires, Dale, 2002. "Capacity utilization measures and excess capacity in multi-product privatized fisheries," Resource and Energy Economics, Elsevier, vol. 24(3), pages 193-210, June.
- 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.
- K. Kerstens & N. Vestergaard & D. Squires, 2006.
"A Short-Run Johansen Industry Model for Common-Pool Resources: Planning a Fishery's Industrial Capacity to Curb Overfishing,"
- Kristiaan Kerstens & Niels Vestergaard & Dale Squires, 2006. "A short-run Johansen industry model for common-pool resources: planning a fishery's industrial capacity to curb overfishing," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(3), pages 361-389, September.
- Lawrence R. Klein & Virginia Long, 1973. "Capacity Utilization: Concept, Measurement, and Recent Estimates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 743-764.
- Pascoe, Sean & Tingley, Diana, 2006. "Economic capacity estimation in fisheries: A non-parametric ray approach," Resource and Energy Economics, Elsevier, vol. 28(2), pages 124-138, May.
- Subhash C. Ray & Kankana Mukherjee & Yanna Wu, 2006.
"Direct And Indirect Measures Of Capacity Utilization: A Non-Parametric Analysis Of Us Manufacturing,"
University of Manchester, vol. 74(4), pages 526-548, 07.
- Subhash C. Ray & Kankana Mukherjee & Yanna Wu, 2005. "Direct and Indirect Measures of Capacity Utilization: A Nonparametric Analysis of U.S. Manufacturing," Working papers 2005-36, University of Connecticut, Department of Economics.
- Sahoo, Biresh K. & Tone, Kaoru, 2009. "Decomposing capacity utilization in data envelopment analysis: An application to banks in India," European Journal of Operational Research, Elsevier, vol. 195(2), pages 575-594, June.
- Rajiv Banker & Hsihui Chang & Ram Natarajan, 2007. "Estimating DEA technical and allocative inefficiency using aggregate cost or revenue data," Journal of Productivity Analysis, Springer, vol. 27(2), pages 115-121, April.
- J. M. Cassels, 1937. "Excess Capacity and Monopolistic Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 51(3), pages 426-443.
- Segerson, Kathleen & Squires, Dale, 1990. "On the measurement of economic capacity utilization for multi-product industries," Journal of Econometrics, Elsevier, vol. 44(3), pages 347-361, June.
- Kim, Seung-Chul & Horowitz, Ira & Young, Karl K. & Buckley, Thomas A., 1999. "Analysis of capacity management of the intensive care unit in a hospital," European Journal of Operational Research, Elsevier, vol. 115(1), pages 36-46, May.
- Holland, D. S. & Lee, S. T., 2002. "Impacts of random noise and specification on estimates of capacity derived from data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 137(1), pages 10-21, February.
- Fare, Rolf & Grosskopf, Shawna & Kokkelenberg, Edward C, 1989. "Measuring Plant Capacity, Utilization and Technical Change: A Nonparametric Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(3), pages 655-666, August.
- Valdmanis, Vivian & Bernet, Patrick & Moises, James, 2010. "Hospital capacity, capability, and emergency preparedness," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1628-1634, December.
When requesting a correction, please mention this item's handle: RePEc:uct:uconnp:2013-09. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark McConnel)
If references are entirely missing, you can add them using this form.