Static efficiency decompositions and capacity utilization: Integrating economic and technical capacity notions

Bruno de Borger, Kristiaan Kerstens, Diego Prior, Ignace Van de Woestyne

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

Starting from existing static decompositions of overall economic efficiency on nonparametric production and cost frontiers, this article proposes more comprehensive decompositions including several cost-based notions of capacity utilization. Furthermore, in case prices are lacking, we develop additional decompositions of overall technical efficiency integrating a technical concept of capacity utilization. These new efficiency decompositions provide a link between short and long run economic analysis and, in empirical work, avoid conflating inefficiency and differences in capacity utilization. An empirical analysis using a monthly panel of Chilean hydroelectric power plants illustrates the potential of these decomposition proposals. © 2012 Taylor & Francis.
Original languageEnglish
Pages (from-to)4125-4141
JournalApplied Economics
Volume44
Issue number31
DOIs
Publication statusPublished - 1 Nov 2012

Keywords

  • Capacity utilization
  • Efficiency

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