Solving the puzzles of structural efficiency

Sung Ko LI*, Yuk Shing CHENG

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

27 Citations (Scopus)

Abstract

Since the concept of "structural efficiency" first appeared in Farrell [Farrell, M.J., 1957. The measurement of productive efficiency. Journal of the Royal Statistical Society, Series A, Part III 120, 253-281], attempts have been made to derive measures for the performance of a group of production units (often referred to an industry with many firms). Many empirical studies used the technical efficiency of an average unit to measure the structural efficiency of a group, but researchers have been puzzled by the discrepancies between the average of individual efficiency scores and the performance of the group as a whole. In this paper, we point out that the "shadow price model" provides a useful framework for understanding the economic meaning of the structural efficiency as well as its components. By recognizing these components, the puzzles related to the inconsistencies between the individual and group performance can be solved readily.

Original languageEnglish
Pages (from-to)713-722
Number of pages10
JournalEuropean Journal of Operational Research
Volume180
Issue number2
DOIs
Publication statusPublished - 16 Jul 2007

Scopus Subject Areas

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

User-Defined Keywords

  • Aggregate allocative efficiency
  • Aggregate technical efficiency
  • Data envelopment analysis
  • Economics
  • Industry efficiency
  • Structural efficiency

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