Skip to main content
SpringerLink
Log in

Measuring productive efficiency using Nerlovian profit efficiency indicator and metafrontier analysis

  • Original Paper
  • Published:
Operational Research Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

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

References

  • Battese GE, Rao DSP, O’Donnell CJ (2004) A metafrontier production function for estimation of technical efficiencies and technology gaps for firms operating under different technologies. J Prod Anal 21:91–103

    Article  Google Scholar 

  • Chambers RG, Chung Y, Färe R (1998) Profits, directional distance functions, and Nerlovian efficiency. J Optim Theory Appl 98(2):351–364

    Article  Google Scholar 

  • Charnes A, Cooper WW, Rhodes E (1978) Measuring the efficiency of decision-making units. Eur J Oper Res 2:429–444

    Article  Google Scholar 

  • Cherchye L, Kuosmanen T, Post T (2000) What is the economic meaning of FDH? A reply to thrall. J Prod Anal 13:263–267

    Article  Google Scholar 

  • Coelli T, Rao DSP, Battese GE (1998) An introduction to efficiency and productivity analysis. Kluwer Academic Publishers, Dordrecht

    Book  Google Scholar 

  • Emrouznejad A (2005) Measurement efficiency and productivity in SAS/OR. J Comput Oper Res 32(7):1665–1683

    Article  Google Scholar 

  • Emrouznejad A, De Witte K (2010) COOPER-framework: a unified process for non-parametric projects. Eur J Oper Res 207(3):1573–1586

    Article  Google Scholar 

  • Emrouznejad A, Parker B, Tavares G (2008) Evaluation of research in efficiency and productivity: a survey and analysis of the first 30 years of scholarly literature in DEA. Socio-Econ Plan Sci 42(3):151–157

    Article  Google Scholar 

  • Färe R, Grosskopf S (1997) Profit efficiency, Farrell decompositions and Mahler inequality. Econ Lett 57:283–287

    Article  Google Scholar 

  • Färe R, Grosskopf S (2004) New directions: efficiency and productivity. Kluwer Academic Publishers, Dordrecht

    Google Scholar 

  • Färe R, Grosskopf S, Weber W (1997) The effect of risk based capital requirements on profit efficiency in banking. Discussion paper series no. 97-12, Department of Economics, Southern Illinois University at Carbondale

  • Fukuyama H, Weber WL (2004) Efficiency and profitability in the Japanese. In: Färe R, Grosskopf S (eds) New directions: efficiency and productivity. Kluwer Academic Publishers, Dordrecht, pp 133–146

    Google Scholar 

  • Hayami Y, Ruttan VW (1971) Agricultural development: an international perspective. Johns Hopkins University Press, Baltimore

    Google Scholar 

  • Lau LJ, Yotopoulos PA (1971) Test for relative efficiency and an application to Indian agriculture. Am Econ Rev 61:94–109

    Google Scholar 

  • Matawie KM, Assaf A (2008) A metafrontier model to assess regional efficiency differences. J Model Manag 3(3):268–276

    Article  Google Scholar 

  • Mulwa R (2006) Economic and environmental performance of sugarcane production in Kenya: non-parametric frontier approaches, farming and rural systems, vol 84. Magraf-Verlag Publishers, Germany

    Google Scholar 

  • Mulwa R, Emrouznejad A, Muhammad L (2009) Economic efficiency of smallholder maize producers in western Kenya: a DEA meta-frontier analysis. Int J Oper Res 4(3):250–267

    Article  Google Scholar 

  • Nerlove M (1965) Estimation and identification of Cobb-Douglas production functions. Rand McNally Company, Chicago

    Google Scholar 

  • Oh D (2010) A metafrontier approach for measuring an environmentally sensitive productivity growth index. Energy Econ 32(1):146–157

    Article  Google Scholar 

  • Portela MCAS, Thanassoulis E (2007) Developing a decomposable measure of profit efficiency using DEA. J Oper Res Soc 58:481–490

    Article  Google Scholar 

  • Rao DSP, Battese GE, O’Donnell CJ (2003) Metafrontier functions for the study of inter-regional productivity differences. Working paper series no. 01/2003. School of Economics, University of Queensland, Australia

  • Varian HR (1992) Microeconomic analysis, 3rd edn. W. W. Norton and Company, NY

    Google Scholar 

Download references

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.

Author information

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

Authors
  1. Richard Mulwa
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ali Emrouznejad
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ali Emrouznejad.

Rights and permissions

Reprints and permissions

About this article

Cite this article

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

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

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

Keywords

Search

Navigation