On Farrell's Decomposition and Aggregation

Rolf Fare and Valentin Zelenyuk
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Rolf Fare: Department of Economics and Department of Agricultural and Resource Economics, Oregon State University, U.S.A.

International Journal of Business and Economics, 2005, vol. 4, issue 2, 167-171

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 theoretically 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: 2005
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Citations: View citations in EconPapers (22)

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Related works:
Working Paper: On Mr. Farrell's Decomposition and Aggregation (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ijb:journl:v:4:y:2005:i:2:p:167-171

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