IDEAS home Printed from https://ideas.repec.org/p/uct/uconnp/2017-09.html
   My bibliography  Save this paper

The Transformation Function, Technical Efficiency, and the CCR Ratio

Author

Listed:
  • Subhash C. Ray

    (University of Connecticut)

Abstract

Charnes, Cooper, and Rhodes define the ratio of the virtual output to the virtual input as a measure of the technical efficiency of a multiple output multiple input firm. The aggregation weights used in constructing the virtual output and the virtual input may be arbitrarily chosen so long as the weights are non-negative and using these weights no firm’s input-output bundle shows efficiency exceeding 100%. In production economics, the ratio of aggregate output to aggregate input is a measure of total factor productivity and a direct link of the CCR ratio to technical efficiency is not obvious. Usually the CCR ratio is rationalized as efficiency by showing its equivalence to the Farrell efficiency measure. This paper offers a direct derivation of the CCR ratio measure of efficiency from a Transformation Function. We also show how the Banker, Charnes, Cooper (BCC) measure under variable returns to scale can be derived from the Transformation Function.

Suggested Citation

  • Subhash C. Ray, 2017. "The Transformation Function, Technical Efficiency, and the CCR Ratio," Working papers 2017-09, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2017-09
    as

    Download full text from publisher

    File URL: http://web2.uconn.edu/economics/working/2017-09.pdf
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Banker, Rajiv D. & Thrall, R. M., 1992. "Estimation of returns to scale using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 62(1), pages 74-84, October.
    2. Leleu, Hervé, 2013. "Inner and outer approximations of technology: A shadow profit approach," Omega, Elsevier, vol. 41(5), pages 868-871.
    3. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Supporting hyperplane; Convexity; Degree of Increasing Returns;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uct:uconnp:2017-09. 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). General contact details of provider: http://edirc.repec.org/data/deuctus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.