Measurement of Dynamic Efficiency: A Directional Distance Function Parametric Approach

Abstract

This research proposes a parametric estimation of the structural dynamic efficiency measures proposed by Silva and Oude Lansink (2009). Overall, technical and allocative efficiency measurements are derived based on a directional distance function and the duality between this function and the optimal value function. The applicability of the parametric proposal is illustrated by assessing dynamic efficiency ratings for a sample of Dutch dairy farms observed from 1995 to 2005.

Primal and dual dynamic Luenberger productivity indicators

“…The empirical application builds on the parametric estimation of the dynamic directional distance function presented in Serra et al (2011), using the Dutch dairy farming data set described above. Quantification of the dynamic directional distance and optimal value functions was achieved by econometric estimation.…”

“…Dynamic cost inefficiency is obtained by estimating a quadratic specification of the optimal value function. The empirical model and the results of the estimation are presented in Appendix A and are more elaborately discussed in Serra et al (2011). The study yielded a dynamic directional distance function that is increasing in variable, quasi-fixed and fixed inputs and decreasing in output and investment demand, and a dynamic cost frontier that is increasing in prices of variable and quasi-fixed inputs and decreases with capital stock.…”

“…An illustration of these measures is applied to a panel of Dutch dairy farms over 1995-2005. The next section develops the primal and dual measures of dynamic productivity growth and its decomposition. This is followed by the empirical application to the panel of Dutch dairy farms which uses the results of a previously estimated dynamic directional distance function found in Serra, Oude Lansink, and Stefanou (2011) to generate the primal and dual measures of productivity growth and their respective decompositions. The final section offers concluding comments.…”

Can ports increase traffic while reducing inputs? Technical efficiency of Spanish Port Authorities using a directional distance function approach

“…As our parametric specification of the directional distance function we follow Färe et al (2005) and Serra et al (2011) by using a quadratic function. This has the advantage that it is easy to impose parametric restrictions so that it satisfies the translation property (4).…”

Managerial and program inefficiency for European meat manufacturing firms: A dynamic multidirectional inefficiency analysis approach

“…Therefore, the main aim of the paper is to develop a dynamic production framework for making comparisons across groups of firms (program inefficiency) and within groups of firms (managerial inefficiency). The introduction of production dynamics in models of efficiency is based on Stefanou (2003, 2007) who estimate hyperbolic efficiency measures, and their further extensions to dynamic directional distance functions by Serra et al (2011), Kapelko et al (2014) and Silva et al (2015). Furthermore, this paper builds on the study of Kapelko and Oude Lansink (2017), who developed a dynamic multidirectional inefficiency model (dynamic MEA), but did not distinguish program inefficiency from managerial inefficiency 4 .…”