Calculating the scale elasticity in DEA models

Finn R. Førsund and Lennart Hjalmarsson

ICER Working Papers from ICER - International Centre for Economic Research

Abstract: In economics scale properties of a production function is charcterised by the value of the scale elasticity. In the field of efficiency studies this is also a valid approach for the frontier production function. It has no good meaning to talk about scale properties of inefficient observations. In the DEA literature a qualitative characterisation is most common. The contribution of the paper is to apply the concept of scale elasticity from multi output production theory in economics to the piecewise linear frontier production function, and to develop formulas for calculating values of the scale elasticity for radial projections of inefficient observations. Illustrations also on real data are provided, showing the differences between scale elasticity values for the input- and output oriented projections and the range of values for efficient observations.

Keywords: Scale elasticity; DEA, production theory; Farrell efficiency measures (search for similar items in EconPapers)
JEL-codes: C61 D24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff
Date: Written 2002-06
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