Bias free measurement of technical efficiency

Kaliappa Kalirajan () and Shashanka Bhide

Journal of Applied Statistics, 2006, vol. 33, issue 5, 523-533

Abstract: Technical efficiency, which is a measure of production performance of a firm, has been estimated generally using a primal production frontier. Since the estimation is carried out for a given level of inputs, the efficiency measure includes the effect of 'input-mix' or 'input-allocation' and consequently, the technical efficiency estimate is biased. The objectives of this paper are to gauge the magnitude of 'input-mix' bias in technical efficiency estimate and to suggest a method to measure technical efficiency eliminating the bias. The workability of the suggested method is demonstrated through an empirical analysis using agricultural data from India covering the period 1970-1993.

Keywords: Technical efficiency; input-mix bias; frontier production function; India (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1080/02664760600585592

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