Allocative efficiency measurement revisited: do we really need input prices?

Arbeitspapier

The traditional approach to measuring allocative efficiency is based on input prices, which are rarely known at the firm level. This paper proposes a new approach to measure allocative efficiency which is based on the output-oriented distance to the frontier in a profit - technical efficiency space - and which does not require information on input prices. To validate the new approach, we perform a Monte-Carlo experiment which provides evidence that the estimates of the new and the traditional approach are highly correlated. Finally, as an illustration, we apply the new approach to a sample of about 900 enterprises from the chemical industry in Germany.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Freiberger Arbeitspapiere ; No. 2006/04

Classification and Topics

• Classification: Wirtschaft ; Allocative Efficiency; Cost-Benefit Analysis ; Organization of Production ; Firm Performance: Size, Diversification, and Scope ; Chemicals; Rubber; Drugs; Biotechnology; Plastics
• Subject: Allocative efficiency ; data envelopment analysis ; frontier analysis ; technical efficiency ; Monte-Carlo study ; chemical industry

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Badunenko, Oleg ; Fritsch, Michael ; Stephan, Andreas
• Event: Veröffentlichung
• (who): Technische Universität Bergakademie Freiberg, Fakultät für Wirtschaftswissenschaften
• (where): Freiberg
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/27098
• Last update: 10.03.2025, 11:41 AM CET