Firm and Industry Level Profit Efficiency Analysis Under Incomplete Price Data: A Nonparametric Approach based on Absolute and Uniform Shadow Prices

We discuss the nonparametric approach to profit efficiency analysis at the firm and industry levels in the absence of complete price information, and propose two new insights. First, choosing one commodity (whose price is known) as a numeraire good enables us to measure profit inefficiency in absolute monetary terms. Second, imposing a ‘Law of One Price’ (LoOP) constraint that all firms should be evaluated in terms of the same input-output prices allows us to aggregate firm-level profit inefficiencies to the overall industry inefficiency. Moreover, the LoOP restrictions increase the discriminatory power of the method by better capturing firm-level allocative inefficiencies. Besides the measurement of profit losses, the presented approach enables one to recover absolute price information from quantity data. We conduct a series of Monte Carlo simulations to study the performance of the proposed approach in controlled production environments.Profit Efficiency, Industry Inefficiency, Data Envelopment Analysis, Absolute Prices, Law of One Price, Weight Restrictions, Simulation

ROBUSTNESS OF NON-PARAMETRIC MEASUREMENT OF EFFICIENCY AND RISK AVERSION

This paper examines the performance of a risk-adjusted non-parametric approach to measuring efficiency and risk aversion. Prior work is extended to the case where agent behavior is motivated by expected utility maximization. Results indicate the approach significantly outperforms traditional efficiency measurement methods when applied to risk averse agents.Risk and Uncertainty,

SUSTAINABLE EFFICIENCY OF FIRMS WHEN NEW SUSTAINABILITY TARGETS ARE INTRODUCED

There is a high potential for simultaneously increasing sustainability of the earth system and economic development by removing inefficiencies currently present both at the production input and output side. In this paper a static view on sustainability is employed, by introducing capacity constraints as the boundaries above (or below) which the system cannot maintain its stable state. Currently these capacity constraints are often not respected. In this paper it is shown how the efficiency improvement pathway of an industry and the firms within it can be calculated to come to a sustainable, profit maximizing state, given the existence of these capacity constraints.Efficiency analysis, sustainability, DEA, directional distance vectors, Resource /Energy Economics and Policy,

Industrialisation: Import Substitution to Export Promotion

Import-substitution policy creates biases in the incentive structure and lowers the growth of potential exports in the long run. Trade reforms in this respect are likely to reduce the gap between domestic and border prices. The expectation is to bring better industrial performance on the lines of comparative advantages. This paper examines the import-substitution policy and the effect and impact of trade liberalisation.import substitution, exports, industrialisation, export promotion

A test of two views of the regulatory mechanism: Averch-Johnson and Joskow

A test of the Averech-Johnson and the Joskov models of the electric utility regulatory process.Electric utilities ; Industrial policy

Eco-Efficiency Analysis of Consumer Durables Using Absolute Shadow Prices

We develop a method for eco-efficiency analysis of consumer durables by utilizing Data Envelopment Analysis (DEA). In contrast to previous product efficiency studies, we consider the measurement problem from the perspective of a policy maker. The novel innovation of the paper is to measure efficiency in terms of absolute shadow prices that are optimized endogenously within the model to maximize efficiency of the good. Thus, the efficiency measure has a direct economic interpretation as a monetary loss due to inefficiency, expressed in some currency unit. The advantages as well as technical differences between the proposed approach and the traditional production-side methods are discussed in detail. We illustrate the approach by an application to eco-efficiency evaluation of Sport Utility Vehicles.Activity Analysis, Data Envelopment Analysis (DEA), Environmental efficiency, Product evaluation, Sport Utility Vehicles (SUVs)

Economic Efficiency, Structure and Scale Economies in the U.S. Dairy Sector

This study uses a new dataset based on the 2000 Agricultural Resource Management Survey, the most recent national survey of dairy producers in the United States. A shadow cost function is employed to decompose and analyze economic efficiency and scale economies. The study details the development of the data employed in the analysis and focuses on the estimation of scale relationships across farms in different regions and of different sizes. Preliminary results point to important scale economies and suggest that surviving small farms are on average more economically efficient but can exploit scale economies to a much lesser degree than larger farms. The preferred specification of the cost function does not show a region of decreasing returns to scale.Industrial Organization,