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Linear Input Aggregation Bias in Nonparametric Technical Efficiency Measurement
Author(s) -
Thomas Arthur C.,
Tauer Loren W.
Publication year - 1994
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/j.1744-7976.1994.tb00007.x
Subject(s) - allocative efficiency , nonparametric statistics , measure (data warehouse) , econometrics , a priori and a posteriori , process (computing) , production (economics) , computer science , economics , microeconomics , data mining , philosophy , epistemology , operating system
An attraction of the nonparametric approach to measuring technical efficiency is that no a priori structure is placed on the production process of the firm. However, inputs are typically linearly aggregated, either explicitly or implicitly. It is shown that this introduces bias in the technical efficiency measurement. The computed technical efficiency measure becomes an economic efficiency measure comprised of both technical and allocative efficiency. An empirical application demonstrates the bias.