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Journal of Productivity Analysis

, Volume 24, Issue 1, pp 31–48 | Cite as

Hyperbolic Efficiency and Parametric Distance Functions: With Application to Spanish Savings Banks

  • Rafael A. Cuesta
  • José L. Zofío
Article

Abstract

Distance functions are gaining relevance as alternative representations of production technologies, with growing numbers of empirical applications being made in the productivity and efficiency field. Distance functions were initially defined on the input or output production possibility sets by Shephard (1953, 1970) and extended to a graph representation of the technology by Färe, Grosskopf and Lovell (1985) through their graph hyperbolic distance function. Since then, different techniques such as non parametric-DEA and parametric-SFA have been used to calculate these distance functions. However, in the latter case we know of no study in which the restriction to input or output orientation has been relaxed. What we propose is to overcome such restrictiveness on dimensionality by defining and estimating a parametric hyperbolic distance function which simultaneously allows for the maximum equiproportionate expansion of outputs and reduction of inputs. In particular, we introduce a translog hyperbolic specification that complies with the conventional properties that the hyperbolic distance function satisfies. Finally, to illustrate its applicability in efficiency analysis we implement it using a data set of Spanish savings banks.

Keywords

production frontiers parametric distance functions hyperbolic efficiency banking efficiency 

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Copyright information

© Springer Science+Business Media, Inc. 2005

Authors and Affiliations

  1. 1.Caja de Ahorros de Asturias and Departamento de EconomíaUniversidad de OviedoOviedoSpain
  2. 2.Departamento de Análisis Económico: Teoría Económica e Historia EconómicaUniversidad Autónoma de MadridCantoblancoSpain

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