Industry performance and structural efficiency measures: Solutions to problems in firm models

It is shown that average-unit structural efficiency measures do not measure the level of technical efficiency in a firm model of an industry. Alternative structural efficiency measures, generalized to multiple-input and multiple-output technologies, are presented as a solution to the problem of how to estimate the relative performance of an industry as a whole where reallocation of inputs across firms is not feasible. Compared to existing measures, the proposed measures require additional information. Therefore, the linear-programming DEA models needed to obtain this information are presented. This non-parametric approach to relative efficiency measurement is also used to obtain economic-efficiency estimates for an industry as a whole without imposing a priori restrictions on the relative input and output weights.