A Distance Function Approach for Estimating Technical and Allocative Inefficiency

Giannis Karagiannis, Subal Kumbhakar and Mike Tsionas

Indian Economic Review, 2004, vol. 39, issue 1, 19-30

Abstract: This paper presents a procedure for measuring technical and allocative inefficiency in an input distance function framework. The procedure involves solving a system of equations to compute the unobserved cost minimizing input vector that is used to compute the cost of allocative inefficiency. The system is non-linear but a rather simple linear approximation may also be used. Thus we show that the input distance function approach provides information not only on the extent of input over - (under-) utilization but also their impact on cost.

Keywords: Technical and Allocative Efficiency; Input Distance Function (search for similar items in EconPapers)
JEL-codes: C31 (search for similar items in EconPapers)
Date: 2004
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