Endogenous dynamic inefficiency and optimal resource allocation: An application to the European Dietetic Food Industry
Entidad
UAM. Departamento de Análisis Económico, Teoría Económica e Historia EconómicaEditor
ElsevierFecha de edición
2022-05-16Cita
10.1016/j.ejor.2022.05.017
European Journal of Operational Research (2022): 1-14
ISSN
0377-2217 (print)DOI
10.1016/j.ejor.2022.05.017Financiado por
Assoc. Prof. Magdalena Kapelko acknowledges financial support by the National Science center in Poland (grant no. 2016/23/B/HS4/03398) and by the Ministry of Science and Higher Education in Poland under the programme “Regional Initiative of Excellence” program 20192022, project number 015/RID/2018/19 total funding amount 10 1159 721 040.00 PLNVersión del editor
https://doi.org/10.1016/j.ejor.2022.05.017Materias
Adjustment costs; Data envelopment analysis; Dynamic cost inefficiency; Endogenous directional distance function; EconomíaDerechos
© 2022 The AuthorsEsta obra está bajo una licencia de Creative Commons Reconocimiento-NoComercial-SinObraDerivada 4.0 Internacional.
Resumen
The conventional dynamic cost inefficiency model relies on the directional distance function with an exogenous directional vector to measure technical and allocative inefficiency. However, this approach may lead to contradictory recommendations for firms to become technically and allocatively efficient. By definition, the conventional model forces firms to reduce their inputs and increase their investments in order to become technically efficient; for some firms this is followed by the reverse recommendation to become allocatively efficient. This paper proposes a model that endogenizes the directional vector to solve for the cost minimizing combination of inputs and investments. In contrast to the conventional model with an exogenous directional vector, our model provides managers with monotonic prescriptions. We illustrate the superiority of the endogenous directional vector model over its conventional counterpart using a dataset of EU firms in the dietetic food industry. The differences in the managerial prescriptions are striking, with the conventional model wrongly recommending reductions in inputs that are underused with respect to their optimal amounts minimizing cost
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Google Scholar:Kapelko, Magdalena
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Oude Lansink, Alfons
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Zofío Prieto, José Luis
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