Aggregation of directional distance functions and industrial efficiency

Walter Briec (), Benoît Dervaux () and Hervé Leleu
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Walter Briec: UPVD - Université de Perpignan Via Domitia
Hervé Leleu: LEM - Laboratoire d'Economie et de Management - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur

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Abstract: Three main objectives are pursued in this paper. First, we intend to analyze the aggregation problem of directional distance functions from a constructive viewpoint. We provide necessary and sufficient conditions concerning the structural properties of the production technology and of the nature of groups of firms. Indeed, exact additive aggregation holds for a linear technology and for a direction solely defined in the output space. Second, since these conditions are somewhat restrictive, we are interested in providing a measure for the aggregation bias through the relationship between industrial and structural technical efficiency. Finally, we show that this aggregation bias is a lower bound for industrial allocative efficiency.

Date: 2003-07-01
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Published in Journal of Economics, 2003, 79 (3), pp.237-261

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05623464

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