TESTING FOR INVERSE HOMOTHETICITY: A NONPARAMETRIC APPROACH

The efficiency of a decision-making unit can be estimated relative to the direct output possibility set or the indirect (cost-constrained) output possibility set. For the direct and indirect output sets we show that the ratio of two Farrell (radial) efficiency measures equals the ratio of two Zieschang (non-radial) efficiency measures if and only if the production technology is inverse-homothetic. A consequence of inverse homotheticity is that the input and output expansion paths are linear.