Measuring productive efficiency using Nerlovian profit efficiency indicator and metafrontier analysis
- 543 Downloads
The aim of this paper is to illustrate the measurement of productive efficiency using Nerlovian indicator and metafrontier with data envelopment analysis techniques. Further, we illustrate how profit efficiency of firms operating in different regions can be aggregated into one overarching frontier. Sugarcane production in three regions in Kenya has been used to illustrate these concepts. Results show that the sources of inefficiency in all regions are both technical and allocative, but allocative efficiency contributes more to the overall Nerlovian (in)efficiency indicator.
KeywordsProductive efficiency Nerlovian profit efficiency indicator Metafrontier Data envelopment analysis Sugarcane farming
The authors thank the anonymous reviewers and Professor Constantin Zopounidis, the editor of Operational Research: An International Journal for their insightful comments and suggestions.
- Färe R, Grosskopf S (2004) New directions: efficiency and productivity. Kluwer Academic Publishers, DordrechtGoogle Scholar
- Färe R, Grosskopf S, Weber W (1997) The effect of risk based capital requirements on profit efficiency in banking. Discussion paper series no. 97-12, Department of Economics, Southern Illinois University at CarbondaleGoogle Scholar
- Fukuyama H, Weber WL (2004) Efficiency and profitability in the Japanese. In: Färe R, Grosskopf S (eds) New directions: efficiency and productivity. Kluwer Academic Publishers, Dordrecht, pp 133–146Google Scholar
- Hayami Y, Ruttan VW (1971) Agricultural development: an international perspective. Johns Hopkins University Press, BaltimoreGoogle Scholar
- Lau LJ, Yotopoulos PA (1971) Test for relative efficiency and an application to Indian agriculture. Am Econ Rev 61:94–109Google Scholar
- Mulwa R (2006) Economic and environmental performance of sugarcane production in Kenya: non-parametric frontier approaches, farming and rural systems, vol 84. Magraf-Verlag Publishers, GermanyGoogle Scholar
- Nerlove M (1965) Estimation and identification of Cobb-Douglas production functions. Rand McNally Company, ChicagoGoogle Scholar
- Rao DSP, Battese GE, O’Donnell CJ (2003) Metafrontier functions for the study of inter-regional productivity differences. Working paper series no. 01/2003. School of Economics, University of Queensland, AustraliaGoogle Scholar
- Varian HR (1992) Microeconomic analysis, 3rd edn. W. W. Norton and Company, NYGoogle Scholar