Rolf Färe

Department of Economics and Department of Agricultural and Resource Economics, Oregon State University, U.S.A.

Institut de Statistique, Université Catholique de Louvain, Belgium

and

UPEG at EROC-EERC-Kyiv, Ukraine

In this paper we show that in order to aggregate individual efficiency scores into a group (e.g., industry) efficiency score in such a way that the multiplicative structure of further decompositions is preserved with equal weights across components, the weighted geometric mean is required. We also show how the weights can be chosen using a variation of a theorem by Koopmans (1957). In the end, our paper provides a mathematically consistent and theoretically justified way of aggregation of Farrell-type efficiency scores.

Back