Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions

Bruno De Borger, Kristiaan Kerstens, Diego Prior and Ignace Van de Woestyne

Applied Economics, 2012, vol. 44, issue 31, 4125-4141

Abstract: Starting from existing static decompositions of overall economic efficiency on nonparametric production and cost frontiers, this article proposes more comprehensive decompositions including several cost-based notions of capacity utilization. Furthermore, in case prices are lacking, we develop additional decompositions of overall technical efficiency integrating a technical concept of capacity utilization. These new efficiency decompositions provide a link between short and long run economic analysis and, in empirical work, avoid conflating inefficiency and differences in capacity utilization. An empirical analysis using a monthly panel of Chilean hydro-electric power plants illustrates the potential of these decomposition proposals.

Date: 2012
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Related works:
Journal Article: Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions (2013)
Working Paper: Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions (2012)
Working Paper: STATIC EFFICIENCY DECOMPOSITIONS AND CAPACITY UTILISATION: INTEGRATING ECONOMIC AND TECHNICAL CAPACITY NOTIONS (2011)
Working Paper: Static Efficiency Decompositions and Capacity Utilisation: Integrating Economic and Technical Capacity Notions (2009)
Working Paper: Static efficiency decompositions and capacity utilisation: integrating economic and technical capacity notions (2007)
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DOI: 10.1080/00036846.2011.587783

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