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On technical inefficiency indicators at the industry level

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  • Färe, Rolf
  • Grosskopf, Shawna
  • Karagiannis, Giannis

Abstract

In this note, we show how alternative measures of technical inefficiency at the industry level–evaluated along different direction vectors–are related to one another. We exploit the homogeneity property of the directional distance function with respect to the direction vector, to verify that aggregate (industry) efficiency evaluated relative to the industry aggregate input-output vector is equal to the average of the individual efficiency scores in the industry evaluated relative to the average input-output vector.

Suggested Citation

  • Färe, Rolf & Grosskopf, Shawna & Karagiannis, Giannis, 2018. "On technical inefficiency indicators at the industry level," International Journal of Production Economics, Elsevier, vol. 196(C), pages 333-334.
    • Handle: RePEc:eee:proeco:v:196:y:2018:i:c:p:333-334
    DOI: 10.1016/j.ijpe.2017.12.006
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    References listed on IDEAS

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    1. Aparicio, Juan & Pastor, Jesus T. & Ray, Subhash C., 2013. "An overall measure of technical inefficiency at the firm and at the industry level: The ‘lost profit on outlay’," European Journal of Operational Research, Elsevier, vol. 226(1), pages 154-162.
    2. R. Färe & S. Grosskopf & G. Whittaker, 2013. "Directional output distance functions: endogenous directions based on exogenous normalization constraints," Journal of Productivity Analysis, Springer, vol. 40(3), pages 267-269, December.
    3. Walter Briec & Benoit Dervaux & Hervé Leleu, 2003. "Aggregation of Directional Distance Functions and Industrial Efficiency," Journal of Economics, Springer, vol. 79(3), pages 237-261, July.
    4. Park, Kang H. & Weber, William L., 2006. "A note on efficiency and productivity growth in the Korean Banking Industry, 1992-2002," Journal of Banking & Finance, Elsevier, vol. 30(8), pages 2371-2386, August.
    5. Giannis Karagiannis, 2015. "On structural and average technical efficiency," Journal of Productivity Analysis, Springer, vol. 43(3), pages 259-267, June.
    6. R. G. Chambers & Y. Chung & R. Färe, 1998. "Profit, Directional Distance Functions, and Nerlovian Efficiency," Journal of Optimization Theory and Applications, Springer, vol. 98(2), pages 351-364, August.
    7. Leleu, Hervé & Briec, Walter, 2009. "A DEA estimation of a lower bound for firms' allocative efficiency without information on price data," International Journal of Production Economics, Elsevier, vol. 121(1), pages 203-211, September.
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    Cited by:

    1. Bilel Jarraya & Hatem Afi & Anis Omri, 2023. "Analyzing the Profitability and Efficiency in European Non-Life Insurance Industry," Methodology and Computing in Applied Probability, Springer, vol. 25(2), pages 1-25, June.

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