Static Efficiency Decompositions And Capacity Utilisation: Integrating Economic And Technical Capacity Notions

Starting from existing static decompositions of overall economic efficiency on non-parametric production and cost frontiers, this paper proposes more comprehensive decompositions including several cost-based notions of capacity utilisation. Furthermore, in case prices are lacking, additional decompositions of overall technical efficiency integrating a technical concept of capacity utilization were developed. These new efficiency decompositions provide a link between short and long run economic analysis and, in empirical work, avoid conflating inefficiency and differences in capacity utilisation.