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Measurement of Dynamic Efficiency in Production: An Application of Data Envelopment Analysis to Japanese Electric Utilities

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  • Jiro Nemoto
  • Mika Goto

Abstract

The purpose of this paper is to measure productive efficiencies when a firm employs quasi-fixed inputs that cannot be instantaneously adjusted to their optimal levels. To this end, data envelopment analysis (DEA) is extended to a dynamic framework so that investment behavior can be modelled with the efficient production frontier. Based on the work of Nemoto and Goto (1999), we show how the efficiencies of quasi-fixed inputs and their adjustment processes are evaluated. An application to Japanese electric utilities over the 1981–1995 period delivers empirically plausible results and proves the usefulness of the procedure. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Jiro Nemoto & Mika Goto, 2003. "Measurement of Dynamic Efficiency in Production: An Application of Data Envelopment Analysis to Japanese Electric Utilities," Journal of Productivity Analysis, Springer, vol. 19(2), pages 191-210, April.
    • Handle: RePEc:kap:jproda:v:19:y:2003:i:2:p:191-210
    DOI: 10.1023/A:1022805500570
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    References listed on IDEAS

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    5. Prucha, Ingmar R. & Nadiri, M. Ishaq, 1996. "Endogenous capital utilization and productivity measurement in dynamic factor demand models Theory and an application to the U.S. electrical machinery industry," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 343-379.
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    7. 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.
    8. Nemoto, Jiro & Nakanishi, Yasuo & Madono, Seishi, 1993. "Scale Economies and Over-capitalization in Japanese Electric Utilities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 431-460, May.
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