Technical Inefficiency and X-inefficiency

Akio Torii
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Akio Torii: Chuo University, Institute of Economic Research

Chapter Chapter 4 in Production Efficiency with the Stochastic Management Model, 2026, pp 95-129 from Springer

Abstract: Abstract Chapter 4 discusses the issue of observing "X-inefficiency" in corporate management, as introduced by Leibenstein. It shows that observing technical inefficiency does not empirically prove the existence of X-inefficiency, and even if X-inefficiency does exist, it does not necessarily manifest as technical inefficiency. Furthermore, it demonstrates that if X-inefficiency is defined by its causes, as Leibenstein did, it becomes impossible to empirically prove its existence. Therefore, this chapter proposes to redefine X-inefficiency as "inefficiency in the absence of control" or "uncontrolled inefficiency,’" which serves as a second-best approach for conducting empirical analysis.

Date: 2026
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DOI: 10.1007/978-981-95-3501-9_4

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