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Allocative Efficiency Measurement Revisited: Do We Really Need Input Prices?

Discussion Papers 591, 24 S.

Oleg Badunenko, Michael Fritsch, Andreas Stephan

2006. Jun.

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Published in: Economic Modelling 25 (2008), Issue 5, 1093-1109

Abstract

The traditional approach to measuring allocative efficiency is based on input prices, which are rarely known at the firm level. This paper proposes a new approach to measure allocative efficiency which is based on the output-oriented distance to the frontier in a profit - technical efficiency space - and which does not require information on input prices. To validate the new approach, we perform a Monte-Carlo experiment which provides evidence that the estimates of the new and the traditional approach are highly correlated. Finally, as an illustration, we apply the new approach to a sample of about 900 enterprises from the chemical industry in Germany.



JEL-Classification: D61;L23;L25;L65
Keywords: Allocative efficiency, data envelopment analysis, frontier analysis, technical efficiency, Monte-Carlo study, chemical industry
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/18484

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