Cost and productivity

E. Grifell-Tatjé, C. A.K. Lovell

    Research output: Contribution to journalArticleResearchpeer-review

    15 Citations (Scopus)

    Abstract

    This study develops an analytical model capable of decomposing both intertemporal and multilateral cost variation. It begins by attributing cost variation to a price effect and a quantity effect. Then the quantity effect is decomposed into a productivity effect and an activity effect. The productivity effect in turn decomposes into a cost efficiency effect and, in the intertemporal context, a technical change effect. This paper also shows how the intertemporal and multilateral cost decompositions can be implemented, using linear programming techniques. These techniques offer certain advantages over conventional econometric techniques whenever a substantial portion of cost variation is due to variation in cost efficiency. The two cost decompositions are illustrated with a pair of benchmarking exercises based on a panel of 93 US electric power generating companies, in which variation in cost efficiency does play a key role. Copyright. © John Wiley & Sons, Ltd.
    Original languageEnglish
    Pages (from-to)19-30
    JournalManagerial and Decision Economics
    Volume21
    Issue number1
    DOIs
    Publication statusPublished - 1 Jan 2000

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