On structural and average technical efficiency

Giannis Karagiannis

Journal of Productivity Analysis, 2015, vol. 43, issue 3, 259-267

Abstract: In this paper we explain the discrepancy between the efficiency of the average production unit and average efficiency by means of a covariance term relating size and technical efficiency and the extent of reallocation inefficiency. We show that, regardless of the degree of reallocation efficiency, the efficiency of the average production unit is lower than average efficiency when either size and efficiency are uncorrelated or larger units are more efficient than smaller ones. If however larger units are less efficient than smaller ones, the efficiency of the average production unit is higher than average efficiency as long as reallocation efficiency prevails. In addition, reallocation efficiency and a zero covariance term are sufficient conditions for the efficiency of the average production unit to be equal to average efficiency. Copyright Springer Science+Business Media New York 2015

Keywords: Structural efficiency; Industry efficiency; Average production unit; D21; D24 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s11123-015-0439-x

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