Measuring productivity growth under factor non-substitution: An application to US steam-electric power generation utilities |
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| Authors: | Margarita Genius Spiro E Stefanou Vangelis Tzouvelekas |
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| Institution: | 1. Department of Economics, University of Crete, Greece;2. Department of Agricultural Economics & Rural Sociology, Pennsylvania State University, PA, USA;3. Business Economics Group, Wageningen University, Netherlands |
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| Abstract: | A theoretical framework is developed for decomposing partial factor productivity and measuring technical inefficiency when the underlying technology is characterized by factor non-substitution. With Farrell’s (1957) radial index of technical inefficiency being inappropriate in this case, Russell non-radial indices are adapted to measure technical inefficiency in a Leontief-type model. A system of factor demand equations with a regime specific technical inefficiency term is proposed and estimated allowing for dependence across inputs using a copula approach. Then the paper presents a complete decomposition of partial factor productivity changes using a dataset of US steam-power electric generation utilities. |
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| Keywords: | Productivity and competitiveness OR in energy Productivity growth Technical efficiency Factor non-substitution Leontief-type technologies |
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