Measuring productivity growth under factor non-substitution: An application to US steam-electric power generation utilities

Margarita Genius, Spiro Stefanou and Vangelis Tzouvelekas

European Journal of Operational Research, 2012, vol. 220, issue 3, 844-852

Abstract: A theoretical framework is developed for decomposing partial factor productivity and measuring technical inefficiency when the underlying technology is characterized by factor non-substitution. With Farrell’s (1957) radial index of technical inefficiency being inappropriate in this case, Russell non-radial indices are adapted to measure technical inefficiency in a Leontief-type model. A system of factor demand equations with a regime specific technical inefficiency term is proposed and estimated allowing for dependence across inputs using a copula approach. Then the paper presents a complete decomposition of partial factor productivity changes using a dataset of US steam-power electric generation utilities.

Keywords: Productivity and competitiveness; OR in energy; Productivity growth; Technical efficiency; Factor non-substitution; Leontief-type technologies (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:220:y:2012:i:3:p:844-852

DOI: 10.1016/j.ejor.2012.02.023

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