Please use this identifier to cite or link to this item: http://hdl.handle.net/20.500.11861/8972
Title: Partially convex production technology and efficiency measurement
Authors: Li, Sung Ko 
Dr. TSANG Chun Kei, Thomas 
Dr. LEE Shu Kam 
Issue Date: 2024
Source: Journal of Productivity Analysis, 2024.
Journal: Journal of Productivity Analysis 
Abstract: Economists tend to believe that production technology should exhibit increasing returns to scale first and then constant and finally decreasing returns to scale, called regular variable returns to scale (RVRS) in this paper. Further, a special pattern of RVRS production technology when there is only one output is the production function that has an S-shaped curve along any ray of inputs from the origin. In the literature on efficiency analysis, the most frequently used empirical technology is the variable returns to scale (VRS) production technology. Although it exhibits RVRS, it is unable to model nonconvex production technologies, such as the S-shaped production function. Recently, a new empirical production technology has been introduced to capture RVRS with partial convexity. This paper explores its relationship with efficiency measurement. Furthermore, a novel empirical production technology that can better capture the characteristics of the S-shaped production function is proposed. These two new production technologies provide better alternatives to the commonly used Free Disposal Hull (FDH) production technology in non-convex production with RVRS. Our new production technology is illustrated using US manufacturing industry data. If one believes that the production technology is partially convex and exhibits RVRS, it is found that the conventional VRS production technology overestimates the technical inefficiency of small production units under this belief.
Type: Peer Reviewed Journal Article
URI: http://hdl.handle.net/20.500.11861/8972
ISSN: 1573-0441
0895-562X
DOI: 10.1007/s11123-023-00716-w
Appears in Collections:Economics and Finance - Publication

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