Estimating output allocative efficiency and productivity change: Application to Japanese banks

Estimating output allocative efficiency and productivity change: Application to Japanese banks

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Article ID: iaor20022854
Country: Netherlands
Volume: 137
Issue: 1
Start Page Number: 177
End Page Number: 190
Publication Date: Feb 2002
Journal: European Journal of Operational Research
Authors: ,
Keywords: allocation: resources, statistics: data envelopment analysis
Abstract:

A new measure of output allocative efficiency is developed by comparing the input technical efficiency of a firm for the direct input requirement set and the indirect input requirement set proposed by Shephard. The ratio of the direct and indirect input quasi-distance functions serves as the measure of output allocative efficiency. As such, it measures the ratio of potential to actual inputs if the firm had chosen the revenue maximizing output mix. Using panel data on Japanese banks operating during 1992–1996 productivity growth is measured and decomposed into changes in output allocative efficiency, changes in input technical efficiency, and technical change. During the period, Japanese banks experienced productivity declines averaging 2% per year and could have used only 78–93% of actual inputs if they had chosen the revenue maximizing output mix.

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