On Mr. Farrell's Decomposition and Aggregation

Rolf Fare and Valentin Zelenyuk

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we show that in order to aggregate individual efficiency scores into a group (e.g., industry) efficiency score, in such a way that the multiplicative structure of further decompositions is preserved with equal weights across components, the weighted geometric mean is required. We also show how the weights can be chosen using a variation of a theorem by Koopmans (1957). In the end, our paper provides a mathematically consistent and economic-theory justified way of aggregation of Farrell-type efficiency scores.

Keywords: Farrell efficiency; Index Aggregation (search for similar items in EconPapers)
JEL-codes: D24 (search for similar items in EconPapers)
Date: 2002-06, Revised 2005-05-23
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Citations: View citations in EconPapers (22)

Published in International Journal of Business and Economics 2.4(2005): pp. 167-171

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Journal Article: On Farrell's Decomposition and Aggregation (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28005

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