Allocative efficiency of technically inefficient production units

Allocative efficiency of technically inefficient production units

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Article ID: iaor20063232
Country: Netherlands
Volume: 168
Issue: 2
Start Page Number: 450
End Page Number: 462
Publication Date: Jan 2006
Journal: European Journal of Operational Research
Authors: , ,
Keywords: organization
Abstract:

We discuss how to measure allocative efficiency without presuming technical efficiency. This is relevant when it is easier to introduce reallocations than improvements of technical efficiency. We compare the approach to the traditional one of assuming technical efficiency before measuring allocative efficiency. In particular, we develop necessary and sufficient conditions in the technology to ensure consistent measures, we suggest alternative interpretations of the approaches, and we relate them to motivational and organizational change perspectives.

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