1 PRODUCTION FRONTIERS AND PRODUCTIVE EFFICIENCY C. A. Knox Lovell 1.1 Introduction When discussing the performance of production units, it is common to describe them as being more or less "efficient," or more or less "productive." In this chapter 1 I discuss the relationship between these two concepts, and I consider some hypotheses concerning the determinants of producer performance as measured by efficiency and productivity. I then turn to an analysis of some of the techniques that have been developed for measuring efficiency and productivity. Since these techniques are discussed in detail in the next three chapters, and illustrated in subsequent chapters, my analysis of them is brief and nontechnical. It focuses on the differences among the techniques, and on their relative strengths and weaknesses. By the productivity of a production unit I mean the ratio of its output to its input. This ratio is easy to compute if the unit uses a single input to produce a single output. In the more likely event that the unit uses several inputs to produce several outputs, the outputs in the numerator must be aggregated in some economically sensible fashion, as must the inputs in the denominator, so that productivity remains the ratio of two scalars. Productivity varies due to differences in production technology, differences in the efficiency of the production process, and differences in the environment in which production occurs. I am interested in isolating the efficiency component and measuring its contribution to productivity. 1 This chapter draws on ideas that I have developed over a period of several years, usually in the company of exceptionally talented coauthors and frequently with the generous financial support of the U.S. National Science Foundation. I am fortunate to have had access to extensive and helpful comments on a previous draft of this chapter from Rolf Fare, Bill Greene, Shawna Grosskopf, K. P. Kalirajan, Larry Seiford, Philippe Vanden Eeckaut, and, most importantly, Hal Fried. Fried, Harold O., et al. Measurement of Productive Efficiency : Techniques and Applications, Oxford University Press, 1993. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/bibliocordoba-ebooks/detail.action?docID=241626. Created from bibliocordoba-ebooks on 2017-10-20 02:17:30. Copyright © 1993. Oxford University Press. All rights reserved.