Non-radial cost Luenberger productivity indicator

Yu-Hui Lin, Tsu-Tan Fu, Chia-Li Chen and Jia-Ching Juo

European Journal of Operational Research, 2017, vol. 256, issue 2, 629-639

Abstract: This study decomposes cost inefficiency into technical and allocative components in a more general way based on the directional Russell measure (DRM) of Fukuyama and Weber (2009), with the allocative component being completely clear of technical inefficiency. Based on this decomposition, we develop a cost-oriented productivity indicator, the cost Luenberger productivity indicator (CL), which completely embraces the concept of cost minimization and provides four sources of productivity change: technical efficiency change, the change in allocative efficiency, the shift of technology, and the effect of input price change. To illustrate the above decompositions of cost inefficiency and productivity change and to investigate whether the establishment of a financial holding company (FHC) offers a bank greater operating efficiency and an improvement in productivity change, this study employs data on Taiwan's banking industry covering the period 2006–2012.

Keywords: Data envelopment analysis (DEA); Russell efficiency; Luenberger productivity indicator; Cost-oriented productivity change (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:256:y:2017:i:2:p:629-639

DOI: 10.1016/j.ejor.2016.06.031

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