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Measuring and decomposing profit inefficiency through the Slacks-Based Measure

Juan Aparicio, Lidia Ortiz and Jesus T. Pastor

European Journal of Operational Research, 2017, vol. 260, issue 2, 650-654

Abstract: The Slacks-Based Measure was introduced by Tone (2001) in order to estimate technical efficiency in the input-output space by taking into account all sources of technical inefficiency and satisfying, at the same time, many interesting properties. Since then, the Slacks-Based Measure has attracted the interest of numerous researchers and practitioners. The Slacks-Based Measure has been applied to technical efficiency determination, productivity change measurement, the analysis of production process performance consisting of networks, and so on. However, so far, the Slacks-Based Measure has not been directly related to profit inefficiency as a component of the overall economic performance of firms. In this note, we show how a specific normalized measure of profit inefficiency may be decomposed through the Slacks-Based Measure.

Keywords: DATA Envelopment Analysis; Profit inefficiency; Slacks-Based Measure (search for similar items in EconPapers)
Date: 2017
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European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

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Handle: RePEc:eee:ejores:v:260:y:2017:i:2:p:650-654