Efficiency: A dynamic approach

Sören Wibe

doi:10.1016/j.ijpe.2008.05.001

Efficiency: A dynamic approach

Sören Wibe

Publication: Contribution to journal › Journal article › peer-review

Abstract

Most firms work with a technology less efficient than the best available. In a dynamic context, this is perfectly rational, since it is uneconomical to scrap old capital equipment as soon as a new and better model appears in the market. In a dynamic context, we would expect a difference between the observable technology of a firm and the technological frontier, a sort of "rational inefficiency". In this paper we construct an equilibrium growth model that allows us to calculate the size of this particular inefficiency, and we discuss how it relates to the efficiency measures in the widely used Farell model. (c) 2008 Elsevier B.V. All rights reserved.

Original language	English
Pages (from-to)	86-91
Number of pages	6
Journal	International Journal of Production Economics
Volume	115
Issue number	1
DOIs	https://doi.org/10.1016/j.ijpe.2008.05.001
Publication status	Published - 2008

Keywords

efficiency
dynamic model
engineering production function

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10.1016/j.ijpe.2008.05.001

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AB - Most firms work with a technology less efficient than the best available. In a dynamic context, this is perfectly rational, since it is uneconomical to scrap old capital equipment as soon as a new and better model appears in the market. In a dynamic context, we would expect a difference between the observable technology of a firm and the technological frontier, a sort of "rational inefficiency". In this paper we construct an equilibrium growth model that allows us to calculate the size of this particular inefficiency, and we discuss how it relates to the efficiency measures in the widely used Farell model. (c) 2008 Elsevier B.V. All rights reserved.

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KW - dynamic model

KW - engineering production function

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KW - dynamic model

KW - engineering production function

UR - https://res.slu.se/id/publ/20526

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Efficiency: A dynamic approach

Abstract

Keywords

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