Estimating the technical efficiency of a firm by eliminating the effects of exogenous factors

Urmas Sepp
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Urmas Sepp: Institute of Economics, Estonia

Finnish Economic Papers, 1990, vol. 3, issue 2, 146-155

Abstract: The paper discusses the problem of estimating technical efficiency in a way objective from the standpoint of firms. Such estimation is possible if the effect of factors uncontrollable by the firm is eliminated. To carry out the corresponding analysis a system of factors of technical efficiency and possibilities for solving this system are presented. An approach based on a deterministic model of the effect of factors noncontrollable by the firm is recommended. The application of this technique is possible in case of limited information when only time-series data can be used. In connection with this also the way technical efficiency is to be estimated is referred to. For practical application of this approach an optimal programming problem is formulated. A numerical example is given.

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:fep:journl:v:3:y:1990:i:2:p:146-155

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