The Decompositions of Cost Variation

Bert Balk and José Zofío

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: In this paper a number of meaningful and empirically implementable decom- positions of the cost variation (in difference and ratio form) are developed. The components distinguished are price level change, technical efficiency change, allocative efficiency change, technological change, scale of activity change, and price structure change. Given data from a (balanced) panel of produc- tion units, all the necessary ingredients for the computation of the various decompositions can be obtained by using linear programming techniques. An application is provided.

Keywords: Cost variation; decomposition; efficiency change; technological change; index number theory (search for similar items in EconPapers)
JEL-codes: C43 D24 O12 (search for similar items in EconPapers)
Pages: 20
Date: 2019-05-09
New Economics Papers: this item is included in nep-eff and nep-ore
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