Article (Scientific journals)
Efficiency measurement, multiple-output technologies and distance functions: with application to European Railways
Coelli, Tim; Perelman, Sergio
2000In Applied Economics, (32), p. 1967-1976
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Abstract :
[en] The single-output production function has long been regarded as one of the principle limitations of the econometric approach to technical efficiency measurement. If one wished to investigate efficiency in a multiple-output industry using econometric methods one would usually either: (a) aggregate outputs into a single index of output (e.g., total revenue or a multilateral Tornqvist output index); or (b) attempt to model the technology using a dual cost function. The first of these methods require that output prices be observable (and reflect revenue maximising behaviour), while the latter approach requires an assumption of cost-minimising behaviour. There are a number of instances, however, when neither of these requirements are met (the public sector contains many examples). In this study we outline the recently developed distance function solution to the multi-output problem. The method is illustrated using data on European railways. Output-orientated, input-orientated and constant returns to scale distance functions are estimated using corrected ordinary least squares. The distance function estimates are also compared with production function estimates involving aggregate output measures. These comparisons indicate that, for the case of European railways, a production function involving a multilateral Tornqvist output index exhibits substantially less aggregation bias relative to a production function that uses total revenue as a measure of aggregate output.
Research center :
CREPP - Centre de Recherche en Économie Publique et de la Population - ULiège
Disciplines :
Economic systems & public economics
Author, co-author :
Coelli, Tim
Perelman, Sergio  ;  Université de Liège - ULiège > HEC-Ecole de gestion : UER > Economie publique appliquée
Language :
English
Title :
Efficiency measurement, multiple-output technologies and distance functions: with application to European Railways
Publication date :
2000
Journal title :
Applied Economics
ISSN :
0003-6846
eISSN :
1466-4283
Publisher :
Routledge
Issue :
32
Pages :
1967-1976
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBi :
since 17 March 2010

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