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On Estimating Optimal a-Returns to Scale

Author

Listed:
  • Jean-Philippe Boussemart

    (University of Lille 3 and IESEG School of Management (LEM 9221-CNRS))

  • Walter Briec

    (University of Perpignan)

  • Hervé Leleu

    (CNRS-LEM and IESEG School of Management)

  • Paola Ravelojaona

    (University of Perpignan)

Abstract

From a theoretical point of view, a-returns to scale is a relevant alternative to traditional Data Envelopment Analysis models for estimating production technologies under global returns to scale assumptions such as strictly increasing or strictly decreasing returns to scale. However, from a methodological and empirical point of view, the estimation of a remains a question that must be answered. This paper proposes an effective methodology to estimate an optimal value of a based upon a goodness-of-fit strategy. A global method using a grid-search is presented first. In addition, for generalized Free Disposal Hull technologies, a minimum extrapolation principle is developed to estimate directly the optimal a-returns from a linear program. This study examined 63 US industries over the period 1987-2012 to demonstrate the relevancy of our approach.

Suggested Citation

  • Jean-Philippe Boussemart & Walter Briec & Hervé Leleu & Paola Ravelojaona, 2016. "On Estimating Optimal a-Returns to Scale," Working Papers 2016-EQM-01, IESEG School of Management.
    • Handle: RePEc:ies:wpaper:e201601
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    References listed on IDEAS

    as
    1. J.Ph. Boussemart & W. Briec & H. Leleu, 2010. "Linear programming solutions and distance functions under alpha-returns to scale," Post-Print hal-00573297, HAL.
    2. R. Färe & S. Grosskopf & D. Njinkeu, 1988. "Note---On Piecewise Reference Technologies," Management Science, INFORMS, vol. 34(12), pages 1507-1511, December.
    3. 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.
    4. J-P Boussemart & W Briec & H Leleu, 2010. "Linear programming solutions and distance functions under α-returns to scale," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(8), pages 1297-1301, August.
    5. J.Ph. Boussemart & W. Briec & N. Peypoch & C. Tavera, 2006. "Returns to Scale Multi-Output Production Technologies," Post-Print hal-00287997, HAL.
    6. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    7. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    8. Lau, Lawrence J., 1978. "Applications of Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.),Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 3, McMaster University Archive for the History of Economic Thought.
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    Cited by:

    1. Hideyuki Mizobuchi & Valentin Zelenyuk, 2023. "A generalized flexible functional form for α-returns to scale," Journal of Productivity Analysis, Springer, vol. 59(3), pages 217-224, June.

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    More about this item

    Keywords

    a-Returns to Scale; Data Envelopment Analysis; Increasing Returns;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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