Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions |
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| Authors: | Bruno De Borger Diego Prior Ignace Van de Woestyne |
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| Institution: | 1. Department of Economics , University of Antwerp , Prinsstraat 13, Antwerp B-2000, Belgium;2. IESEG School of Management , CNRS-LEM (UMR 8179), 3 rue de la Digue, Lille F-59000, France;3. Department of d’Economia de l’Empresa , Universitat Autònoma de Barcelona , E-08193 Bellaterra, Spain;4. Faculty of Economics and Management , Hogeschool-Universiteit Brussels , Stormstraat 2, B-1000 Brussels, Belgium |
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| 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 hydro-electric power plants illustrates the potential of these decomposition proposals. |
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| Keywords: | efficiency capacity utilization |
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