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The Measurement of Productive Efficiency and Productivity Change$
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Harold O. Fried, C. A. Knox Lovell, and Shelton S. Schmidt

Print publication date: 2008

Print ISBN-13: 9780195183528

Published to Oxford Scholarship Online: January 2008

DOI: 10.1093/acprof:oso/9780195183528.001.0001

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Efficiency and Productivity

Efficiency and Productivity

(p.3) 1 Efficiency and Productivity
The Measurement of Productive Efficiency and Productivity Change

Harold O. Fried

C. A. Knox Lovell (Contributor Webpage)

S. Schmidt Shelton

Oxford University Press

This chapter begins with a brief discussion of variations in productive efficiency using airlines as an example. It then presents the main purpose of the book, which is to study inefficiency in production and its impact on economic and financial performance. The chapter then provides background material and focuses on hypotheses that have been proposed in literature that would explain variation in producer performance; lays the theoretical foundation for the measurement of productive efficiency; offers a brief introduction to alternative techniques that have been developed to quantify inefficiency empirically; introduces various econometric approaches to efficiency estimation; introduces variants of the mathematical programming approach to efficiency estimation; introduces the Malmquist productivity index and shows how to decompose it into various sources of productivity change, including variation in productive efficiency; and describes three ways of approximating a Malmquist productivity index: the use of superlative index numbers, the use of econometric techniques, and the use of mathematical programming techniques. An overview of the succeeding chapters is also presented.

Keywords:   productive efficiency, economic theory, production inefficiency, economic performance, financial performance, Malmquist productivity index

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