Axiomatic Foundations of Efficiency Measurement on Data-Generated Technologies

Robert Russell () and William Schworm
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Robert Russell: University of California, Riverside

No 2007-35, Discussion Papers from School of Economics, The University of New South Wales

Abstract: Dmitruk and Koshevoy [1991 JET] provided a complete characterization of the class of technologies for which there exists an efficiency index satisfying the Fare-Lovell [1978 JET] axioms. The technologies implicit in the standard mathematical-programming methods of measuring efficiency, data envelopment analysis (DEA) and free-disposal-hull (FDH) analysis, belong to this class. We assess the ability of three well-known indexes, the Debreu-Farrell index, the Fare-Lovell index, and the Zieschang index, to satisfy not only the Fare-Lovell axioms but also continuity axioms (for technologies as well as input quantities), on this restricted class of technologies. Our principal conclusions are that (a) restriction to these data-based technologies adds continuity in input quantities to the properties satisfied by the Fare-Lovell and the Zieschang indexes (thus eliminating a salient advantage of the Debreu-Farrell index), but (b) none of the indexes satisfies all Fare-Lovell axioms (nor all continuity axioms) on either DEA or FDH technologies, and hence (c) trade-offs among the indexes remain. These findings provide motivation for the search for an index that does satisfy these axioms on DEA and FDH technologies.

Keywords: Technical efficiency indexes; technical efficiency axioms (search for similar items in EconPapers)
JEL-codes: C43 C61 D24 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2007-12
New Economics Papers: this item is included in nep-eff
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Journal Article: Axiomatic foundations of efficiency measurement on data-generated technologies (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:swe:wpaper:2007-35

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