the tale of two research communities the diffusion of research on productive efficiency abstract the field of theoretical and applied efficiency analysis is pursued both by economists and people from operational research and management science each group tends to cite a different paper as the seminal one recent availability of extensive electronically accessible databases of journal articles makes studies of the diffusion of papers through citations possible research strands inspired by the seminal paper within economics are identified and followed by citation analysis during the 20 year period before the operations research paper was published the first decade of the operations research paper is studied in a similar way and emerging differences in diffusion patterns are pointed out main factors influencing citations apart from the quality of the research contribution are reputation of journal reputation of author number of close followers colleagues cadres of proteges ph d students and extent of network invisible college such factors are revealed by the citing papers in spite of increasing cross contacts between economics and operations research the last decades co citation analysis reveals a relative constant tendency to stick to own camp references

efficiency analysis for exogenously fixed inputs and outputs we evaluate by means of mathematical programming formulations the relative technical and scale efficiencies of decision making units dmus when some of the inputs or outputs are exogenously fixed and beyond the discretionary control of dmu managers this approach further develops the work on efficiency evaluation and on estimation of efficient production frontiers known as data envelopment analysis dea we also employ the model to provide efficient input and output targets for dmu managers in a way that specifically accounts for the fixed nature of some of the inputs or outputs we illustrate the approach using real data for a network of fast food restaurants

the structure and incentive effects of corporate tax liabilities this paper describes situations in which tax liabilities assume the form of a negative position in a call option this structure motivates an examination of the investment decisions of taxed corporations in the presence of risk it is shown that the structure of the tax liability creates an incentive to underinvest in more risky projects and an incentive for conglomerate merger these effects are then evaluated in the presence of conflicts of interest between stockholders and bondholders and under alternative assumptions about the tax code and about the timing of investment and financing decisions this paper makes an observation regarding the functional form assumed by the tax liabilities of corporations with potentially redundant deductions and evaluates its consequences for investment incentives interest and other deductions against taxable income can be taken for the most part only to the extent of that income in a single period model this gives the net tax liability a familiar structure it can be viewed as a call option where the exercise price on the call is the allowable deductions the tax paying entity holds a positive position in the assets which generate the taxable income and a negative position in a call option on those assets the analogy between options and the structure of tax liabilities calls attention to some interesting incentive effects concerning risk using their model of option valuation black and scholes 5 showed that the value of an option is increasing in the variance of the asset it is written on other authors have generalized this result and studied its implications for corporate financing see jagannathan 16 jensen and meckling 17 and green 15 the importance of the risk attributes of the underlying asset in option valuation suggests that taxation may have important incentive consequences for investment decisions involving risk it has been recognized in the public economics literature for some time that asymmetries in the tax schedule can affect risk taking behavior early papers by mossin 20 and stiglitz 25 studied individual portfolio decisions over a riskless and a risky asset our analysis differs from these in a number of respects the most important of these is our use of market valuation rather than expected utility in the decision maker s objective function this is surely a more appropri

university library benchmarking an international comparison using dea abstract this paper proposes a framework for assessing the technical efficiency of 118 university libraries from australia austria canada germany switzerland and the united states the flexible non parametric approach of data envelopment analysis has been chosen to analyse the performance differentials of university libraries we also investigate whether the institutional settings affect the degree of library efficiency the findings of the intercountry efficiency comparison revealed that almost one third of the university libraries are technically efficient using environment specific frontiers to distinguish differences in managerial efficiency from differences in environmental efficiency we found considerable differences in technical efficiency between european and non european university libraries however as regards the environmental setting the non european best practice frontier outperforms the european best practice frontier

estimating most productive scale size using data envelopment analysis abstract the relation between the most productive scale size mpss for paparticular input and output mixes and returns to scale for multiple inputs multiple outputs situations is explicitly developed this relation is then employed to extend the applications of data envelopment analysis dea introduced by charnes cooper and rhodes ccr to the estimation of most productive scale sizes for convex production possibility sets it is then shown that in addition to productive inefficiencies at the actual scale size the ccr efficiency measure also reflects any inefficiencies due to divergence from the most productive scale size two illustrations of the practical applications of these results to the estimation of most productive scale sizes and returns to scale for hospitals and stem electric generation plants are also provided emphasize the advantage of this method in examining specific segments of the efficient production surface

firm specific knowledge and technical efficiency of watch and clock manufacturing firms in china abstract this paper tests whether firm specific knowledge in terms of capital intensity product differentiation and research and development contribute to an improvement in firm efficiency based on a representative dataset from the watch and clock industry in southern china the technical efficiency is estimated using a non parametric data envelopment analysis approach through a tobit model we investigate whether a firm s specific knowledge influences its efficiency the results suggest that capital intensity and research and development have a positive effect on the efficiency of the sample firms and identify their roles of firm specific knowledge in explaining inter firm variation in efficiency however sample firms with high level of product differentiation were found to have no obvious advantages in efficiency performance

testing efficiency hypotheses in joint production a parametric approach n recent years a great deal of research has been directed to the modelling and measurement of technical and allocative efficiency in production with few exceptions this research has been restricted to single product firms however recent developments in duality theory have facilitated the extension of this research to multi product firms the main purpose of this paper is to develop a model of the multiproduct firm in which the possibilities of both technical and allocative inefficiency are incorporated in an econometrically useful way the first model we develop includes a nonneutral2 type of technical inefficiency and three distinguishable types of allocative inefficiency output mix input mix and scale each type of inefficiency is costly to the firm in the sense that each causes a reduction in profit beneath the maximum value attainable under full efficiency the cost of each type of inefficiency depends on the magnitude of the inefficiency and the structure of the underlying production technology in the second model we develop technical inefficiency remains nonneutral but allocative inefficiency is not generally decomposable into output mix input mix and scale components however both technical and allocative inefficiency remain costly to the firm the cost of each type of inefficiency depending on its magnitude and the structure of the underlying production technology we model the technology of a competitive profit maximizing multi product firm with the dual profit function this enables us to use hotelling s lemma to generate a system of profit maximizing output supply and input demand equations these equations are then modified to allow for the possibility of technical and three types of allocative inefficiency a virtue of using the profit function to represent production technology is that it permits a straightforward comparison of maximum profit under full efficiency with actual profit and with the profit that would result from any combination of the four types of inefficiency this enables us to allocate the cost of inefficiency to each of four components our model of inefficiency is parametric and is embedded in a generalized leontief profit function although any flexible specification of the profit function can be used the model is developed in sections ii iv estimation of the model is considered in section v an empirical example designed to illustrate the workings of the model is discussed in section vi section vii concludes

malmquist indices of productivity growth during the deregulation of norwegian banking 1980 89 productivity growth during the deregulation of the norwegian banking industry is studied within the framework of data envelopment analysis which explicitly allows for multiple outputs introducing malmquist indices for productivity growth total growth can be decomposed into frontier growth and change in each bank s distance to the frontier both the total growth index and its components can be consistently chained over time we find productivity regress at the average bank prior to the deregulation but rapid growth when deregulation took place deregulation also led to less dispersion of productivity levels within the industry

corporate risk management and the incentive effects of debt this paper demonstrates how the incentive of manager equityholders to substitute toward riskier assets commonly referred to as the asset substitution problem is related to the level of observable risk in the firm when observable and unobservable risks are sufficiently positively correlated increases decreases in observable risk generate the incentive for manager equityholders to increase decrease unobservable risk thus credible commitments to hedge observable risk can benefit the firm s manager equityholders by reducing the incentive to shift risk and the associated agency cost of debt this provides a positive rationale for hedging diversifiable risk at the firm level in the last few years a sizeable literature has emerged which is devoted to explaining how shareholders can benefit from hedging undertaken by the firm such hedging may include the purchase of insurance the use of financial futures and options and even diversification at the level of the firm four lines of reasoning have been pursued in the literature smith and stulz 1985 and campbell and kracaw 1987 rely on the fact that under optimal contracting between managers and shareholders managers are less diversified than are shareholders hedging by the firm which reduces the manager s exposure to risk can improve on the optimal compensation contract between the manager and equityholders this argument may be applied to a firm with any capital structure or any degree of leverage the other arguments apply to firms which are financed with risky debt smith and stulz show that hedging may be useful in reducing expected bankruptcy costs they also show as does macminn 1985 that hedging by the firm may reduce the probability that depreciation tax shields may be lost due to financial distress finally diamond 1984 has shown that monitoring costs may be reduced through diversification macminn s result is of particular interest part of his analysis is based on an earlier paper by green and talmor 1985 which demonstrates that the equityholders of a levered firm will have an incentive to underinvest in risky assets if the firm cannot capture its interest and depreciation tax shields with certainty in green and talmor s analysis the firm has no mechanism to reduce or hedge the uncertainty surrounding its tax shields other than to alter its investment decisions however as macminn argues if the firm is allowed to hedge its risks

returns to scale in different dea models abstract this paper discusses returns to scale rts in data envelopment analysis dea for each of the presently available types of models the bcc and ccr models are treated in input oriented forms while the multiplicative model is treated in output oriented form this distinction is not pertinent for the additive model which simultaneously maximizes outputs and minimizes inputs in the sense of a vector optimization quantitative estimates in the form of scale elasticities are treated in the context of multiplicative models but the bulk of the discussion is confined to qualitative characterizations such as whether rts is identified as increasing decreasing or constant this is discussed for each type of model and relations between the results for the different models are established the opening section describes and delimits approaches to be examined the concluding section outlines further opportunities for research

risk management in the global economy a review essay abstract this paper provides a review of developments in the area of risk management at both the firm level and the macro economy we review rationales regarding why firms choose to manage risk as well as new developments in measuring and managing risk in a dynamic setting we also consider current risk sharing arrangements in light of the theory regarding optimal risk sharing the paper concludes with some suggestions for additional research that emphasizes the importance of incorporating market incompleteness in an equilibrium setting we also discuss the role of incompleteness at the macro level and speculate on how derivatives markets may influence macro economic stabilization policy

total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 1978 this article total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 78 was reprinted with permission from the december 1982 issue of the economic journal this article proposes a methodology that decomposes total factor productivity change into two distinct elements technological progress and changes in technical efficiency technological progress is defined as the change in the best practice production frontier all other productivity change is attributed to technical efficiency change the article provides a theoretical framework for decomposing total factor productivity growth as well as a specification and estimation of the deterministic frontier production function it employs a programming technique to estimate a flexible functional form of the production frontier the paper then applies this technique to empirical data from yugoslavia of the period from 1965 to 1978 it concludes that for yugoslavia improvements to technical efficiency comprise the dominant contribution to total factor productivity change this agrees with accumulating evidence that in many developing economies productivity gain due to technological mastery of imported technology is substantial

reallocation shocks persistence and nominal rigidities abstract we reconsider the role of reallocation shocks in a simple new keynesian model with search and matching frictions the sign of the conditional correlation between unemployment and vacancies depends on the degree of price rigidity and on the persistence of the shock therefore a non negligible role for reallocation shocks in driving business cycle fluctuations cannot be ruled out on theoretical grounds

efficiency a dynamic approach abstract most firms work with a technology less efficient than the best available in a dynamic context this is perfectly rational since it is uneconomical to scrap old capital equipment as soon as a new and better model appears in the market in a dynamic context we would expect a difference between the observable technology of a firm and the technological frontier a sort of rational inefficiency in this paper we construct an equilibrium growth model that allows us to calculate the size of this particular inefficiency and we discuss how it relates to the efficiency measures in the widely used farell model

incentive efficient production frontiers an agency perspective on dea in this paper we examine how empirical production frontiers may contribute to the incentives of production units we consider a series of data envelopment analysis dea frontiers and we show when these may be incentive efficient in the sense that they contain all the information that are relevant for optimal incentive provision the frontiers considered include the so called constant decreasing and varying return to scale models the free disposability and the free replicability models as well as the increasing and decreasing return to scale models based on a relaxed set of assumptions also we illustrate how to design optimal incentive schemes based on such frontiers contents 1 introduction 2 the incentive problem 3 production frontiers and productivity measures 4 incentive efficient production frontiers 5 extensions 6 an example 7 final remarks mathematical appendix references

banking efficiency in the nordic countries abstract evidence of the relative competitiveness of the banking industries in three nordic countries is provided by applying data envelopment analysis of productivity on the national and the pooled data sets the analysis produces a detailed account of how well banks from different countries and different sizes may be prepared to meet the more intense competition of a common european banking market

forward markets stock markets and the theory of the firm this paper models a competitive financial market economy in which there are forward markets as well as stock and bond markets although there are separation theorems in the stock and forward markets literatures this analysis shows that neither separation theorem survives in this integrated financial market economy next the analysis shows that the separation results hold and are equivalent if the manager has an appropriate compensation package then the model is modified to allow for depreciation charges and tax credits a positive theory of hedging is developed that shows that the corporation can preserve deductions and credits by hedging and so increase corporate value the theory of the firm under uncertainty has been developed along seemingly independent lines in the literature on stock market economies and the literature on forward market economies there are some interesting parallels but apparently no financial market model also incorporates forward markets some of the models in the two literatures may be viewed as extensions of the theory of the competitive firm under uncertainty developed by both baron 1 and sandmo 13 in each literature the firm manager s optimal production decision may be characterized as the production level at which expected price equals marginal cost plus a marginal risk premium each literature contains a separation theorem in the stock market literature we have the unanimity theorem which shows that stockholders will agree on the optimal production level despite different probability beliefs and attitudes toward risk in a competitive stock market economy this result is equivalent to all stockholders agreeing that the firm should maximize corporate value since any competitive firm s manager finds it in his or her own best interests to maximize corporate value despite his or her probability beliefs and attitude toward risk the unanimity theorem is a separation theorem in the forward market literature we have a separation theorem that shows that any firm manager will select the production level at which the forward price equals marginal cost again despite his or her probability beliefs and attitude toward risk 2 the purpose of this paper is to investigate the theory of the competitive firm in a financial market economy characterized by stock bond and forward markets although one might expect the separation results of the two literatures to survive this generalization we show that they do not we go on to show that

the role of the reference technology in measuring productive efficiency after a twenty year lull the measurement of productive efficiency is enjoying a revival in particular the index of efficiency developed by debreu i95i and later utilised by farrell i957 has received considerable attention these measures have been used fairly extensively in empirical work in both the operations research and economic literature these types of indexes have also appeared in the growing literature on testing for regularity conditions in production e g in afriat i972 diewert and parkan i983 and varian 1984 since the farrell type measure is the focus in this paper a brief review is useful in the farrell framework overall efficiency oe can be decomposed into two multiplicative components allocative efficiency ae and technical efficiency te

measuring the macroeconomic performance of the taiwanese economy abstract in this paper i construct a scalar valued summary measure of the macroeconomic performance of an economy the measure combines any number of conventional but noncommensurate performance indicators the basic idea behind the procedure is to use mathematical programming techniques of efficiency measurement to construct a best practice macroeconomic performance frontier and then to measure performance in terms of an indicator based efficiency score the procedure is applied to a set of ten asian economies over the past two decades with special attention paid to taiwan

technical efficiency of european railways a distance function approach this study has two principal objectives the first objective is to measure and compare the performance of european railways the second objective is to illustrate the usefulness of econometric distance functions in the analysis of production in multioutput industries where behavioural assumptions such as cost minimization or profit maximization are unlikely to be applicable using annual data on 17 railways companies during 1988 1993 multioutput distance functions are estimated using corrected ordinary least squares cols the resulting technical efficiency estimates range from 0 980 for the netherlands to 0 784 for italy with a mean of 0 863 the distance function results are also compared with those obtained from single output production functions where aggregate output measures are formed using either total revenue or a tornqvist index the results obtained indicate substantial differences in parameter estimates and technical efficiency rankings casting significant doubt upon the reliability of

the measurement and sources of technical inefficiency in the indonesian weaving industry production function models are estimated with a time series of cross section data on indonesian weaving establishments the sources of technical inefficiency are investigated three firm attributes are identified as being potentially related to firm efhciency tbey are firm ownership age and size the importance of these attributes as sources of inefficiency in the indonesian weaving industry is investigated and the implications of the find ings discussed

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed