Abstract
Three main objectives are pursued in this paper. First, we intend to analyze the aggregation problem of directional distance functions from a constructive viewpoint. We provide necessary and sufficient conditions concerning the structural properties of the production technology and of the nature of groups of firms. Indeed, exact additive aggregation holds for a linear technology and for a direction solely defined in the output space. Second, since these conditions are somewhat restrictive, we are interested in providing a measure for the aggregation bias through the relationship between industrial and structural technical efficiency. Finally, we show that this aggregation bias is a lower bound for industrial allocative efficiency.
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Briec, W., Dervaux, B. & Leleu, H. Aggregation of Directional Distance Functions and Industrial Efficiency. JEcon 79, 237–261 (2003). https://doi.org/10.1007/s00712-002-0606-1
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DOI: https://doi.org/10.1007/s00712-002-0606-1
Keywords
- aggregation
- distance function
- cost function
- industrial efficiency
- structural efficiency
- allocative efficiency