Alternative efficiency measures for multiple-output production

Carmen Fernandez, Gary Koop, Mark Steel

Research output: Contribution to journalArticle

31 Citations (Scopus)
63 Downloads (Pure)

Abstract

This paper has two main purposes. Firstly, we develop various ways of defining efficiency in the case of multiple-output production. Our framework extends a previous model by allowing for nonseparability of inputs and outputs. We also specifically consider the case where some of the outputs are undesirable, such as pollutants. We investigate how these efficiency definitions relate to one another and to other approaches proposed in the literature. Secondly, we examine the behavior of these definitions in two examples of practically relevant size and complexity. One of these involves banking and the other agricultural data. Our main findings can be summarized as follows. For a given efficiency definition, efficiency rankings are found to be informative, despite the considerable uncertainty in the inference on efficiencies. It is, however, important for the researcher to select an efficiency concept appropriate to the particular issue under study, since different efficiency definitions can lead to quite different conclusions.
Original languageEnglish
Pages (from-to)411-444
Number of pages34
JournalJournal of Econometrics
Volume126
Issue number2
DOIs
Publication statusPublished - 2005

Keywords

  • banking
  • bayesian inference
  • dairy farms
  • pollution
  • productivity
  • separability

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