Benchmarking Economic Efficiency

More about the book

This book unifies and extends the definition and measurement of economic efficiency, serving as a benchmarking technique for organizations. It employs the economic theory of duality and demonstrates how alternative models can be implemented using Data Envelopment Analysis. An open-source software package in Julia is provided for model solutions, complete with source code and documentation available online. The text explores economic efficiency at the firm level, comparing observed and optimal performance, and decomposing it into technical and allocative criteria. Part I focuses on the classic multiplicative approach, detailing cost and revenue efficiency through radial distance functions. It expands into profitability efficiency, utilizing the generalized distance function for technical efficiency measurement. Part II addresses an additive framework for decomposing economic inefficiency in terms of cost, revenue, and profit. It presents various economic models, including Russell measures and different distance functions, with each model discussed in separate chapters. New approaches, such as the reverse directional distance function, are introduced in the final chapters. The conclusion emphasizes the significance of benchmarking economic efficiency for stakeholders and summarizes key findings from extensive research on the subject, offering alternatives for measuring economic efficiency based on desirable properties.