Empirical Consequences of Direction Choice in Technical Efficiency Analysis

Antonio Alvarez, Carlos Arias () and Subal Kumbhakar

No 2003/02, Efficiency Series Papers from University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG)

Abstract: This paper examines the effects of using input- and output-oriented measures of technical inefficiency (direction choice) on the estimated technology, its characteristics and efficiency rankings. If one assumes that the technology is known (as is done in theory) then this issue is trivial. Since the technology is rarely known, and both the technology and inefficiency are to be estimated simultaneously, the choice of direction is very important from an empirical point of view. Using a sample of dairy farms, we show that the estimated characteristics of the technology and efficiency rankings of farms depend on the choice of direction.

Keywords: Input- and output-oriented technical inefficiency; Returns to scale; Output elasticities; Efficiency rankings (search for similar items in EconPapers)
Pages: 17
Date: 2003
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Citations: View citations in EconPapers (5)

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