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Measuring productive efficiency using Nerlovian profit efficiency indicator and metafrontier analysis

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Abstract

The aim of this paper is to illustrate the measurement of productive efficiency using Nerlovian indicator and metafrontier with data envelopment analysis techniques. Further, we illustrate how profit efficiency of firms operating in different regions can be aggregated into one overarching frontier. Sugarcane production in three regions in Kenya has been used to illustrate these concepts. Results show that the sources of inefficiency in all regions are both technical and allocative, but allocative efficiency contributes more to the overall Nerlovian (in)efficiency indicator.

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Notes

  1. See Varian (1992) for an exposition on production axioms and convex hulls.

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Acknowledgments

The authors thank the anonymous reviewers and Professor Constantin Zopounidis, the editor of Operational Research: An International Journal for their insightful comments and suggestions.

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Authors and Affiliations

  1. University of Nairobi, Nairobi, Kenya

    Richard Mulwa

  2. Operations and Information Management Group, Aston Business School, Aston University, Aston, Birmingham, B4 7ET, UK

    Ali Emrouznejad

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  1. Richard Mulwa
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  2. Ali Emrouznejad
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Correspondence to Ali Emrouznejad.

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Mulwa, R., Emrouznejad, A. Measuring productive efficiency using Nerlovian profit efficiency indicator and metafrontier analysis. Oper Res Int J 13, 271–287 (2013). https://doi.org/10.1007/s12351-011-0119-1

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  • DOI: https://doi.org/10.1007/s12351-011-0119-1

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