On estimating optimal α-returns to scale. Issue 1 (2nd January 2019)

• Record Type: Journal Article
• Authors: Boussemart, Jean-Philippe; Briec, Walter; Leleu, Hervé; Ravelojaona, Paola
• Is Part Of: Journal of the Operational Research Society. Volume 70:Issue 1(2019)
• Page Start: 1
• Page End: 11
• Publication Date: 2019-01-02
• Subjects: α-returns to scale -- data envelopment analysis -- increasing returns to scale -- efficiency; D24; Operations research -- Periodicals; 658.4034
• DOI: 10.1080/01605682.2017.1418148
• Languages: English
• ISSNs: 0160-5682

Abstract

Abstract: From a theoretical point of view, α -returns to scale is a relevant alternative to traditional DEA models for estimating production technologies under global returns to scale assumptions such as strictly increasing or strictly decreasing returns to scale. However, from a methodological and empirical point of view, a remaining question is the estimation ofα . This contribution proposes an effective methodology to estimate an optimal value ofα based upon a goodness-of-fit strategy. A global method using a grid search is presented first. Second, for generalised FDH technologies, a minimum extrapolation principle is developed to estimate directly the optimalα -returns from a linear program. An illustration on 63 US industries over the period 1987–2012 shows the relevancy of our approach.