Are distance measures effective at measuring efficiency? DEA meets the vintage model

Constantin Belu

Journal of Productivity Analysis, 2015, vol. 43, issue 3, 237-248

Abstract: In this paper I develop a model of capacity expansion that accounts for differences in the productivity of the installed capital due to technical progress exhibited by the ex ante production function. A putty-clay set-up is assumed, meaning flexible input coefficients and substitution possibilities ex ante, but fixed input coefficients ex post. Based on the model, I generate a capacity distribution of DMUs (vintages) describing an industry with a homogeneous output and perform an efficiency analysis employing data envelopment analysis, a popular non-parametric method for estimating efficiency. The results show that in some circumstances older vintages might appear on the efficiency frontier, unlike some newer vintages that are found to be inefficient, despite benefiting from the advancement of the technology. Copyright Springer Science+Business Media New York 2015

Keywords: Technical efficiency; Vintage; Putty-clay; Best-practice; Data envelopment analysis; DEA; C61; D24 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s11123-015-0438-y

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