IDEAS home Printed from https://ideas.repec.org/a/kap/jproda/v62y2024i3d10.1007_s11123-023-00697-w.html
   My bibliography  Save this article

Productive efficiency analysis with incomplete output information

Author

Listed:
  • Laurens Cherchye

    (University of Leuven)

  • Bram Rock

    (University of Leuven
    Université Libre de Bruxelles)

  • Dieter Saelens

    (University of Leuven
    National Bank of Belgium)

  • Marijn Verschelde

    (University of Leuven
    Univ. Lille, CNRS, UMR 9221–LEM–Lille Economie Management)

Abstract

We present a novel Data Envelopment Analysis (DEA)-type method to evaluate the productive efficiency of Decision Making Units (DMUs) when the empirical analyst has incomplete output information. Our method builds on the Afriat Theorem that was originally proposed in the context of consumer analysis. We translate this result to a production setting and show that it provides a productive basis for cost efficiency analysis in the absence of output information. Our method is versatile in that it can accommodate a continuum of instances characterized by incomplete information on output quantities. We illustrate its practical usefulness through an empirical application that evaluates the productive efficiency performance of countries in producing national welfare.

Suggested Citation

  • Laurens Cherchye & Bram Rock & Dieter Saelens & Marijn Verschelde, 2024. "Productive efficiency analysis with incomplete output information," Journal of Productivity Analysis, Springer, vol. 62(3), pages 291-301, December.
    • Handle: RePEc:kap:jproda:v:62:y:2024:i:3:d:10.1007_s11123-023-00697-w
    DOI: 10.1007/s11123-023-00697-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11123-023-00697-w
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11123-023-00697-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    2. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    3. Laurens Cherchye & Bram De Rock & Bart Dierynck & Filip Roodhooft & Jeroen Sabbe, 2013. "Opening the “Black Box” of Efficiency Measurement: Input Allocation in Multioutput Settings," Operations Research, INFORMS, vol. 61(5), pages 1148-1165, October.
    4. Yan Meng & Christopher F. Parameter & Valentin Zelenyuk, 2021. "Is Newer Always Better? A Reinvestigation Of Productivity Dynamics," CEPA Working Papers Series WP062021, School of Economics, University of Queensland, Australia.
    5. Fabrice Talla Nobibon & Laurens Cherchye & Yves Crama & Thomas Demuynck & Bram De Rock & Frits C. R. Spieksma, 2016. "Revealed Preference Tests of Collectively Rational Consumption Behavior: Formulations and Algorithms," Operations Research, INFORMS, vol. 64(6), pages 1197-1216, December.
    6. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram & Hjertstrand, Per, 2015. "Revealed preference tests for weak separability: An integer programming approach," Journal of Econometrics, Elsevier, vol. 186(1), pages 129-141.
    7. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
    8. Laurens Cherchye & Thomas Demuynck & Bram Rock & Kristof Witte, 2014. "Non‐parametric Analysis of Multi‐output Production with Joint Inputs," Economic Journal, Royal Economic Society, vol. 124(577), pages 735-775, June.
    9. Cinzia Daraio & Léopold Simar, 2005. "Introducing Environmental Variables in Nonparametric Frontier Models: a Probabilistic Approach," Journal of Productivity Analysis, Springer, vol. 24(1), pages 93-121, September.
    10. Rolf Färe & Valentin Zelenyuk, 2021. "On aggregation of multi-factor productivity indexes," Journal of Productivity Analysis, Springer, vol. 55(2), pages 107-133, April.
    11. Färe, Rolf & Karagiannis, Giannis, 2014. "Benefit-of-the-doubt aggregation and the diet problem," Omega, Elsevier, vol. 47(C), pages 33-35.
    12. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
    13. Fabrice Talla Nobibon & Laurens Cherchye & Yves Crama & Thomas Demuynck & Bram De Rock & Frits C. R. Spieksma, 2016. "Revealed Preference Tests of Collectively Rational Consumption Behavior: Formulations and Algorithms," Operations Research, INFORMS, vol. 64(6), pages 1197-1216, December.
    14. Simon Gilchrist & Egon Zakrajsek, 2007. "Investment and the Cost of Capital: New Evidence from the Corporate Bond Market," NBER Working Papers 13174, National Bureau of Economic Research, Inc.
    15. Marc Fleurbaey, 2009. "Beyond GDP: The Quest for a Measure of Social Welfare," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 1029-1075, December.
    16. Hanoch, Giora & Rothschild, Michael, 1972. "Testing the Assumptions of Production Theory: A Nonparametric Approach," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 256-275, March-Apr.
    17. Oleg Badunenko & Daniel J. Henderson & Valentin Zelenyuk, 2017. "The Productivity of Nations," Working Papers in Economics & Finance 2017-05, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    18. Subodh Kumar & R. Robert Russell, 2002. "Technological Change, Technological Catch-up, and Capital Deepening: Relative Contributions to Growth and Convergence," American Economic Review, American Economic Association, vol. 92(3), pages 527-548, June.
    19. Banker, Rajiv D & Maindiratta, Ajay, 1988. "Nonparametric Analysis of Technical and Allocative Efficiencies in Production," Econometrica, Econometric Society, vol. 56(6), pages 1315-1332, November.
    20. J. Steven Landefeld & Eugene P. Seskin & Barbara M. Fraumeni, 2008. "Taking the Pulse of the Economy: Measuring GDP," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 193-216, Spring.
    21. Daniel J. Henderson & R. Robert Russell, 2005. "Human Capital And Convergence: A Production-Frontier Approach ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1167-1205, November.
    22. Yan Meng & Christopher F. Parmeter & Valentin Zelenyuk, 2023. "Is newer always better? A reinvestigation of productivity dynamics using updated PWT data," Journal of Productivity Analysis, Springer, vol. 59(1), pages 1-13, February.
    23. Varian, Hal R, 1984. "The Nonparametric Approach to Production Analysis," Econometrica, Econometric Society, vol. 52(3), pages 579-597, May.
    24. Laurens Cherchye & Thomas Demuynck & Bram De Rock & Cédric Duprez & Glenn Magerman & Marijn Verschelde, 2021. "Structural Identification of Productivity under Biased Technological Change∗," Working Papers ECARES 2021-28, ULB -- Universite Libre de Bruxelles.
    25. Laurens Cherchye & Thomas Demuynck & Bram Rock & Kristof Witte, 2014. "Non‐parametric Analysis of Multi‐output Production with Joint Inputs," Economic Journal, Royal Economic Society, vol. 124(577), pages 735-775, June.
    26. Cazals, Catherine & Florens, Jean-Pierre & Simar, Leopold, 2002. "Nonparametric frontier estimation: a robust approach," Journal of Econometrics, Elsevier, vol. 106(1), pages 1-25, January.
    27. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 419-425.
    28. Fare, Rolf & Grosskopf, Shawna, 1995. "Nonparametric tests of regularity, Farrell efficiency, and goodness-of-fit," Journal of Econometrics, Elsevier, vol. 69(2), pages 415-425, October.
    29. Diewert, W E, 1980. "Capital and the Theory of Productivity Measurement," American Economic Review, American Economic Association, vol. 70(2), pages 260-267, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cherchye, Laurens & De Rock, Bram & Kerstens, Pieter Jan, 2018. "Production with storable and durable inputs: Nonparametric analysis of intertemporal efficiency," European Journal of Operational Research, Elsevier, vol. 270(2), pages 498-513.
    2. Cherchye, Laurens & De Rock, Bram & Hennebel, Veerle, 2014. "The economic meaning of Data Envelopment Analysis: A ‘behavioral’ perspective," Socio-Economic Planning Sciences, Elsevier, vol. 48(1), pages 29-37.
    3. Laurens Cherchye & Thomas Demuynck & Bram Rock & Kristof Witte, 2014. "Non‐parametric Analysis of Multi‐output Production with Joint Inputs," Economic Journal, Royal Economic Society, vol. 124(577), pages 735-775, June.
    4. Mike Tsionas & Valentin Zelenyuk, 2021. "Goodness-of-fit in Optimizing Models of Production: A Generalization with a Bayesian Perspective," CEPA Working Papers Series WP182021, School of Economics, University of Queensland, Australia.
    5. Laurens Cherchye & Bram De Rock, 2024. "Nonparametric Analysis of Separable Production Technologies with Intermediate Inputs," Working Papers ECARES 2024-13, ULB -- Universite Libre de Bruxelles.
    6. Thomas Demuynck & John Rehbeck, 2023. "Computing revealed preference goodness-of-fit measures with integer programming," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(4), pages 1175-1195, November.
    7. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008. "Analyzing Cost-Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology," Operations Research, INFORMS, vol. 56(1), pages 204-221, February.
    8. Walheer, Barnabé, 2018. "Disaggregation of the cost Malmquist productivity index with joint and output-specific inputs," Omega, Elsevier, vol. 75(C), pages 1-12.
    9. Andreas Eder & Wolfgang Koller & Bernhard Mahlberg, 2024. "The contribution of industrial robots to labor productivity growth and economic convergence: a production frontier approach," Journal of Productivity Analysis, Springer, vol. 61(2), pages 157-181, April.
    10. Smeulders, Bart & Crama, Yves & Spieksma, Frits C.R., 2019. "Revealed preference theory: An algorithmic outlook," European Journal of Operational Research, Elsevier, vol. 272(3), pages 803-815.
    11. Laurens Cherchye & Bram De Rock & Dieter Saelens & Marijn Verschelde & Bart Roets, 2022. "Performance Analysis with Unobserved Inputs: An Application to Endogenous Automation in Railway Traffic Management," Working Papers ECARES 2022-06, ULB -- Universite Libre de Bruxelles.
    12. Kerekes, Monika, 2007. "Analyzing patterns of economic growth: a production frontier approach," Discussion Papers 2007/15, Free University Berlin, School of Business & Economics.
    13. Aguiar, Victor H. & Kashaev, Nail & Allen, Roy, 2023. "Prices, profits, proxies, and production," Journal of Econometrics, Elsevier, vol. 235(2), pages 666-693.
    14. Barnabé Walheer, 2019. "Disaggregation for efficiency analysis," Journal of Productivity Analysis, Springer, vol. 51(2), pages 137-151, June.
    15. Cherchye, Laurens & Rock, Bram De & Walheer, Barnabé, 2015. "Multi-output efficiency with good and bad outputs," European Journal of Operational Research, Elsevier, vol. 240(3), pages 872-881.
    16. Oleg Badunenko & Daniel J. Henderson & Valentin Zelenyuk, 2008. "Technological Change and Transition: Relative Contributions to Worldwide Growth During the 1990s," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(4), pages 461-492, August.
    17. Cherchye, Laurens & Rock, Bram De & Saelens, Dieter & Verschelde, Marijn & Roets, Bart, 2024. "Productive efficiency analysis with unobserved inputs: An application to endogenous automation in railway traffic management," European Journal of Operational Research, Elsevier, vol. 313(2), pages 678-690.
    18. Cherchye, Laurens & De Rock, Bram & Walheer, Barnabé, 2016. "Multi-output profit efficiency and directional distance functions," Omega, Elsevier, vol. 61(C), pages 100-109.
    19. Kuosmanen, Timo & Post, Thierry & Scholtes, Stefan, 2007. "Non-parametric tests of productive efficiency with errors-in-variables," Journal of Econometrics, Elsevier, vol. 136(1), pages 131-162, January.
    20. Ding, Jingjing & Dong, Wei & Liang, Liang & Zhu, Joe, 2017. "Goal congruence analysis in multi-Division Organizations with shared resources based on data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 263(3), pages 961-973.

    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:kap:jproda:v:62:y:2024:i:3:d:10.1007_s11123-023-00697-w. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.