Efficiency and Productivity Change of Non‐Life Insurance Companies in Japan

In a book published in 1994, Production Frontiers , Färe and colleagues developed an output‐based DEA (data envelopment analysis) technique to compute productivity change. The technique constructs the Malmquist index using Farrell measures of efficiency. The Farrell efficiency measures are derived from linear programming problems which allow slack in output constraints. The possible existence of output slack is less than desirable in the computation of efficiency. Therefore, the present paper constructs also the Russell and Zieschang measures of efficiency, which disallow output slack and compares them with the Farrell measures. The analysis uses data on Japanese non‐life insurance firms during the period 1983–94.