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Calculating the scale elasticity in DEA models

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  • Finn R. FF8rsund
  • Lennart Hjalmarsson

Abstract

In economics scale properties of a production function is charcterised by the value of the scale elasticity. In the field of efficiency studies this is also a valid approach for the frontier production function. It has no good meaning to talk about scale properties of inefficient observations. In the DEA literature a qualitative characterisation is most common. The contribution of the paper is to apply the concept of scale elasticity from multi output production theory in economics to the piecewise linear frontier production function, and to develop formulas for calculating values of the scale elasticity for radial projections of inefficient observations. Illustrations also on real data are provided, showing the differences between scale elasticity values for the input- and output oriented projections and the range of values for efficient observations.

Suggested Citation

  • Finn R. FF8rsund & Lennart Hjalmarsson, 2002. "Calculating the scale elasticity in DEA models," ICER Working Papers 28-2002, ICER - International Centre for Economic Research.
    • Handle: RePEc:icr:wpicer:28-2002
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    References listed on IDEAS

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    More about this item

    Keywords

    Scale elasticity; DEA; production theory; Farrell efficiency measures;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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