• Title, Summary, Keyword: Allocative Efficiency

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국내 화력발전산업의 연료의 효율적 배분과 CO2 저검규모 추정

  • Lee, Myeong-Heon
    • Environmental and Resource Economics Review
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    • v.21 no.1
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    • pp.3-25
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    • 2012
  • Generally speaking, firms, faced with a regulatory environment, are likely to use more or less inputs than optimal level due to allocative inefficiency of inputs. This paper, first, tests allocative efficiency of fuel inputs and calculates the divergence between the actual and optimal levels of each fuel input conditional on the optimal level of capital stock in Korean thermal power industry. Then, given that each fuel is efficiently allocated. potential reduction of $CO_2$ is estimated over the period 1987~2008. The null hypothesis of allocative efficiency with respect to all fuels is rejected, indicating that thermal power plants fail to attain cost minimization subject do market prices. Allocative efficiency between each pair of fuels is also tested; efficient uses of fuels relative to each other are all rejected. Empirical results indicate that coal and gas are used more and oil is used less than optimal level. On average, more than 10 million tons of $CO_2$ per year could be reduced by achieving allocative efficiency of fuels.

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Measuring Allocntive Performance by using DEA Model when price and cost data are available (가격$\cdot$원가정보가 주어진 경우 배분적 성과를 측정하기 위한 DEA모형의 설계)

  • 오동일
    • Journal of the Korea Academia-Industrial cooperation Society
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    • v.5 no.2
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    • pp.191-196
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    • 2004
  • Allocative efficiency measures the extents to which the technically efficient units falls shorts of achieving minimal cost. By using this measure manager can make decision about how to redistribute organizational resources to improve price efficiency. Allocative and overall efficiency are derived on the basis of budget line and cost minimization concept. The purpose of this study is to introduce the concept of allocative efficiency and propose two modified DEA models. Examples are provided to illustrate the similarities and the application procedure of the two model. By providing example and tracing the data application procedure, we found the same results but some cautions are needed to interpret the valuation.

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The Cost Efficiency Analysis of JeollaNamdo Food Industry (전라남도 식품업체의 비용 효율성 분석)

  • Qing, Cheng Lin;Na, JuMong;Chang, Seog Ju;Im, Chang Uk
    • Journal of the Korean Society for Quality Management
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    • v.43 no.4
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    • pp.533-544
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    • 2015
  • Purpose: The purpose of this study is to analyze the cost efficiency of food industry in JeollaNamdo. And this study is focused on the correlation between the economic efficiency of food industry and its cost efficiency, based on the analysis of 372 food companies' data in JeollaNamdo in 2012. Methods: DEA cost minimization is the measurement of the cost efficiency of JeollaNamdo food industry in 2012. In this study, the CCR and BBC models have been employed to analyze the decomposing cost efficiency-technical efficiency, allocative efficiency, and scale efficiency respectively. And the Spearman rank correlation and Wilcoxon signed rank test also have been employed to check the correlation and difference between the ranking orders based on the efficiency scores respectively. Results: For the CCR model, mean cost efficiency was found to be 0.084(0.54 for allocative efficiency and 0.19 for technical efficiency). For the BCC model, mean cost efficiency was found to be 0.252(0.453 for allocative efficiency and 0.564 for technical efficiency). Average scale efficiency was found to be 0.38. In analyzing the results, this study argues that the optimal way to improve cost efficiency is by reducing inputs proportionally and changing their combination. Conclusion: The efficiency scores of the two models show high correlation, whereas, the differences between them are also found to be significant. Hence, it should be cautious to select a suitable model when we do the research.

Estimation of CO2 Abatement Cost Considering Allocative Inefficiency of Inputs for the Korean Steel Industry: A Cost Function Approach (국내 철강업의 생산요소 간 비효율적 배분을 고려한 CO2 저감비용 산정 및 분석: 비용함수접근법)

  • Lee, Myunghun
    • Environmental and Resource Economics Review
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    • v.23 no.3
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    • pp.453-472
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    • 2014
  • Analyzing the effects of carbon emissions trading, which is scheduled to be introduced in Korea in 2015, requires an accurate assessment of $CO_2$ abatement costs by both industries and firms. Firms faced with regulatory constraints are unlikely to minimize their production costs due to rising production costs caused by allocative inefficiency of inputs. The use of a distance function would results in underestimation of $CO_2$ abatement costs, because it fails to capture the allocative distortion costs. Recognizing the disadvantage of the previous approach, first, this paper tests for allocative efficiency of input for the Korean steel industry over the period 1990-2010, then derives the marginal $CO_2$ abatement costs by applying a cost function approach. The hypothesis of allocative efficiency in inputs is rejected and the steel industry pays an annual average cost of 92,000 won in removing an additional ton of $CO_2$ over the sample period.

Misallocation and Manufacturing TFP in Korea

  • OH, JIYOON
    • KDI Journal of Economic Policy
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    • v.38 no.3
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    • pp.37-52
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    • 2016
  • This paper analyzes the effects of allocative efficiency on productivity in the manufacturing sector of Korea following Hsieh and Klenow (2009). The results of this research indicate that the overall allocative efficiency declined from 1990 to 2012. Using the method of Oberfield (2013), which allows inter-industry resource movement as well as intra-industry reallocation, we confirm that intensified misallocation generally results from intra-industry allocative inefficiency. The potential loss from instances of worsening misallocation is estimated to be approximately 0.6% points for each year, which is considerable in terms of the overall TFP. In terms of the firm size distribution, initially large establishments are more likely to expand if distortions are removed in most countries. One notable feature in Korea is that this pattern is pronounced. This implies that subsidies to unproductive small-sized establishments are heavily implemented.

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A Comparative study on the pricing mechanism and social welfare in the Natural Gas Market (국내 천연가스산업의 도매가격결정방식 비교 분석)

  • Namgoong Yoon;Choi Kiryun;Kim Boyung;Lee Kiho
    • Journal of the Korean Institute of Gas
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    • v.2 no.3
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    • pp.18-24
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    • 1998
  • This paper attempts to improve domestic natural gas pricing system, thereby optimizing social welfare. This is done by deriving theoretical frameworks of natural gas pricing, which make use of both Ramsey component pricing rule and Efficient component pricing rule based on the theory of marginal cost. Allocative efficiency and social welfare between gas prices derived from the three pricing mechanism, present Cost-based pricing, Ramsey component pricing rule and Efficient component pricing rule, are analysed and compared in the case study. For the city gas, allocative efficiency of Cost-based pricing is higher than that of Ramsey component pricing rule and Efficient component pricing rule. In contrast, for the natural gas consumed for power generation, allocative efficiency of Cost-based pricing is lower than the other two pricing systems. It also turns out that social welfare is improved by the prices driven from Ramsey component pricing rule and Efficient component pricing rule rather than present Cost-based pricing.

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An Analysis of Economic Efficiency of Fruits Farms: the Case of Apples, Pears, and Grapes Farms (과수 재배농가의 경영효율성 분석: 사과·배·포도를 중심으로)

  • Lee, ChoonSoo;Yun, Sung-Ju;Kim, GunA;Yang, Seung-Ryong
    • Korean Journal of Organic Agriculture
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    • v.23 no.4
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    • pp.615-641
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    • 2015
  • This study analyzes an economic efficiencies of apples, pears, and grapes farming. We evaluate an annual economic overall efficiency (OE), allocative efficiency (AE), technology efficiency (TE), pure technology efficiency (PTE), and scale efficiency (SE) using data envelopment analysis (DEA). We also measure returns to scale of farms, and the change of technical efficiency of frontier farms. Lastly we estimate the effects of some explanatory variables on allocative, pure technical, and scale efficiencies.

Measuring Efficiency and Productivity of the Korean Public Hospitals (공공병원의 효율성 및 생산성 분석)

  • You Taewoo;Yim Jongeun;Zi Hongmin
    • Journal of the Korean Operations Research and Management Science Society
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    • v.29 no.3
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    • pp.79-98
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    • 2004
  • Despite its contribution to the Korean medical service industry the question of how efficiently the Korean public hospitals have operated has been unresolved. This study gauges and analyzes the overall efficiency and the Malmquist productivity index in the industry over the period 1992 through 2001. In addition to cost efficiency. we also measure technical, allocative, pure technical and scale efficiencies. Furthermore. the Malmquist index is decomposed into efficiency and frontier changes. We identify several important factors which seem to have strong relationship with various inefficiency estimates. The results indicate that on average the public hospitals has wasted a significant amount of resources and costs over the period. Unlike many other industries, the low level of cost efficiency of the public hospital industry is mainly due to allocative inefficiency rather than technical inefficiency. The Maimquist productivity indices seem both due to the frontier change and efficiency change, but with more effect by the former. The results also indicate that the turnover of hospital beds has played an important role in determining efficiency and productivity of this important industry.

Discriminating Bidders Can Improve Efficiency in Auction (주파수경매의 효율성 향상방안 : 배분적 외부성이 존재하는 경우를 중심으로)

  • Yang, Yong Hyeon
    • KDI Journal of Economic Policy
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    • v.36 no.4
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    • pp.1-32
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    • 2014
  • Auction is widely used in allocation and procurement of resources due to its desirable properties: efficiency and revenue maximization. It is well-known, however, that auction may fail to achieve efficiency when allocative externalities exist. Such a result may happen in the auction of the resources that are very scarce, for example, radio spectrum. This is because allocation of the resources has effects on competition of the firms in the aftermarket, and thus a firm that utilizes the resources less efficiently may make a higher bid to lessen competition. This paper shows first that efficient allocation may not be achieved by auction even when the number of bidders is 2, while it is shown in the literature that auction may result in inefficient allocation when the number of bidders is greater than or equal to 3. There exist 2 firms, who make a bid to win the scarce resources that increase the value or decrease the production cost of their own product. After the auction ends, the firms engage in Bertrand competition on the Hotelling line. Inefficient allocation may happen even under the second-price auction rule, and it happens only when the firms are different in the initial value or the initial cost of their products as well as in the value of the auctioned resources. The firm who has been the leader loses a large portion of the market if it fails to win the auction, and thus makes a high bid even when the other firm can use the resources more efficiently. Allocative efficiency Pareto improves when the smaller firm's bid counts more than the leader's bid. This paper suggests a modified rule that the smaller firm wins the auction when its bid multiplied by some constant is greater than the leader's bid. The multiplier can be calculated from the market shares. It is equal to 1 when the two firms are the same, and is increasing in the leader's market share. Allocation is efficient in a strictly larger set of parameters under the modified rule than under the standard second-price auction rule.

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An analysis on the effects of higher power rates on supply price and power savings for Korean manufacturing sector (산업 전력요금 인상의 공급가격 및 전력수요 절감 효과 분석:국내 제조업 부문을 대상으로)

  • Lee, Myunghun
    • Environmental and Resource Economics Review
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    • v.23 no.1
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    • pp.43-65
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    • 2014
  • In this paper, we test for allocative efficiency of productive inputs including electricity and measure the divergence between the actual and optimal level of electricity for the chemical products, which is a relatively highly electricity-intensive sector in Korean manufacturing industries, by estimating a shadow cost function. Supposing cost minimization subject to market prices was achieved, we derive the price elasticities of demand for each input and simulate the impact of a 10% increase in power rate on its demand and supply price by estimating jointly a cost function with an inverse supply relation. The null hypothesis of allocative efficiency of inputs is rejected over the period 1982-2006. On average, electricity is used more than optimal level by 98% per year. The demand for electricity decreases by 11.4%, and supply price, on average, falls by 0.08%, other things being equal.