Pastor, Jesús T., Aparicio, Juan, & Zofío, José L. (2022), Benchmarking Economic Efficiency: Technical and Allocative Fundamentals, International Series in Operations Research & Management Science (ISOR, Vol. 346). Springer, Cham. https://doi.org/10.1007/978-3-030-84397-7.
The book unifies and extends the definition and measurement of economic efficiency and its use as a real-life benchmarking technique for actual organizations. The turn of the 21st century has witnessed relevant theoretical breakthroughs that allow a consistent definition and decomposition of profit and profitability according to technical and allocative criteria, taking as reference economic duality and index number theory. In turn, this is translating into a growing number of empirical applications.
The book presents this issue in a comprehensive and structured way, differentiating between the classical multiplicative paradigm a la Farrell, for cost, revenue and profitability analysis, and the new additive approach, based on general loss functions that allow decomposing profit inefficiency. These include Hölder’s definitions, Luenberger’s shortage function―with particular characterizations like directional distance functions, Russell measures, etc. A discussion of the underlying technological (engineering) and allocative (economic) assumptions behind the choice of a particular model is presented, while systematically comparing and discussing their pros and cons.
Empirically, the book shows how the alternative models can be implemented by way of Data Envelopment Analysis techniques. The software available in this site is used to solve the models. The package is a self-contained set of functions that can be used for individual learning and instruction.