The estimation of profit efficiency

This article discusses a way of solving the 'Greene Problem' that has been termed for a technical difficulty in estimating a profit system with technical and allocative inefficiencies. As the 'Greene Problem' is due to the existence of unobserved technical inefficiency interactiv...

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Bibliographic Details
Published in:Applied economics letters 2018-09, Vol.25 (15), p.1066-1070
Main Authors: Han, Yongseung, Kim, Myeong Hwan
Format: Article
Language:English
Subjects:
Economic analysis
Economic theory
Economics
Efficiency
Profits
Technology
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Summary:This article discusses a way of solving the 'Greene Problem' that has been termed for a technical difficulty in estimating a profit system with technical and allocative inefficiencies. As the 'Greene Problem' is due to the existence of unobserved technical inefficiency interactive in a nonlinear form, the article proposes a use of homogeneity in technology to untangle the nonlinear form, enabling the estimation of a profit system as well as the identification of the source of inefficiencies.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2017.1397841