Production Frontiers and Efficiency Measurement

  • Christopher Cornwell
  • Peter Schmidt
Part of the Advanced Studies in Theoretical and Applied Econometrics book series (ASTA, volume 33)

Abstract

The standard definition of a production function is that it gives the maximum possible output for a given set of inputs. This is a different concept than the regression function, which gives mean output for a given set of inputs. Thus the production function defines a boundary or “frontier.” Deviations of observed outputs from this frontier are in principle one-sided (non-positive) and can be taken to reflect inefficiency, since they represent failures to achieve maximum possible output given the inputs. Other types of frontiers exist. For example, a cost function gives the minimum possible cost for a given level of output and set of input prices, and defines a frontier from which deviations are in principle non-negative. In this chapter we will concentrate on the estimation of production frontiers and the measurement of technical inefficiency relative to them.

Keywords

Data Envelopment Analysis Ordinary Little Square Panel Data Technical Efficiency Stochastic Frontier 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Christopher Cornwell
  • Peter Schmidt

There are no affiliations available

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