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Efficiency Measures and Input Aggregation

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Activity analysis models of production that are used to calculate measures of technical, allocative, and overall efficiency typically assume that the production data are measured in physical units. However, it is often the case that data are expressed in money units. Moreover, the inputs are often aggregated into what we call here input-cost aggregates. It is shown that when input-cost aggregates are used the measure of overall efficiency is unbiased (the same as the value obtained with disaggregated data) when all inputs are variable but is biased when some inputs are fixed. Both the technical and allocative measures are shown to be biased whether or not all inputs are variable. In most cases, the direction of the bias is also established.


  • Technical Efficiency
  • Efficiency Measure
  • Input Price
  • Physical Unit
  • Allocative Efficiency

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  • Färe, R., Grosskopf, S. and Lovell, C.A.K. (1985), The Measurement of Efficiency of Production, Kluwer-Nijhoff Publishing, Hingham, MA.

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  • Färe, R., and Primont, D. (1988), “Efficiency Measures for Multiplant Firms with Limited Data”, in: Eichhorn, W. (ed.): Measurement in Economics: Theory and Applications of Economic Indices, Physica-Verlag, Heidelberg.

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© 1993 Springer-Verlag Berlin · Heidelberg

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Primont, D. (1993). Efficiency Measures and Input Aggregation. In: Diewert, W.E., Spremann, K., Stehling, F. (eds) Mathematical Modelling in Economics. Springer, Berlin, Heidelberg.

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  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-642-78510-8

  • Online ISBN: 978-3-642-78508-5

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