Allocative Efficiency Measurement Revisited: Do We Really Need Input Prices?

Oleg Badunenko, Michael Fritsch () and Andreas Stephan

No 591, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: The traditional approach to measuring allocative efficiency is based on input prices, which are rarely known at the firm level. This paper proposes a new approach to measure allocative efficiency which is based on the output-oriented distance to the frontier in a profit - technical efficiency space - and which does not require information on input prices. To validate the new approach, we perform a Monte-Carlo experiment which provides evidence that the estimates of the new and the traditional approach are highly correlated. Finally, as an illustration, we apply the new approach to a sample of about 900 enterprises from the chemical industry in Germany.

Keywords: Allocative efficiency; data envelopment analysis; frontier analysis; technical efficiency; Monte-Carlo study; chemical industry (search for similar items in EconPapers)
JEL-codes: D61 L23 L25 L65 (search for similar items in EconPapers)
Pages: 24 p.
Date: 2006
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Allocative efficiency measurement revisited--Do we really need input prices? (2008)
Working Paper: Allocative efficiency measurement revisited: Do we really need input prices? (2006)
Working Paper: Allocative efficiency measurement revisited: do we really need input prices? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp591

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