Axiomatic Foundations of Inefficiency Measurement on Space

Robert Russell () and William Schworm
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Robert Russell: University of California, Riverside

No 2009-07, Discussion Papers from School of Economics, The University of New South Wales

Abstract: We provide an axiomatic foundation for efficiency measurement in the full space, referred to as “graph efficiency” measurement by Färe, Grosskopf, and Lovell [1985]. We posit four types of axioms: indication, monotonicity, independence of units of measurement, and continuity. We analyze six well-known inefficiency indexes from the operations-research and economics literature and discuss several other related indexes. We present two impossibility results demonstrating that no index can satisfy all of the axioms on a general class of (well-behaved) technologies. Specifically, no inefficiency index can satisfy both indication and continuity (in either quantities or technologies), and no inefficiency index can satisfy both monotonicity and unit independence. We present a full evaluation of the trade-offs involved in selecting among the indexes.

Keywords: Technical efficiency indexes; technical efficiency axioms (search for similar items in EconPapers)
JEL-codes: C43 C61 D24 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2009-04
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:swe:wpaper:2009-07

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