The Decompositions of Cost Variation

20 Pages Posted: 9 May 2019

See all articles by Bert M. Balk

Bert M. Balk

RSM Erasmus University

José L. Zofío

Universidad Autónoma de Madrid; Erasmus Research Institute of Management (ERIM)

Date Written: May 7, 2019

Abstract

In this paper a number of meaningful and empirically implementable decompositions of the cost variation (in difference and ratio form) are developed. The components distinguished are price level change, technical efficiency change, allocative efficiency change, technological change, scale of activity change, and price structure change. Given data from a (balanced) panel of production units, all the necessary ingredients for the computation of the various decompositions can be obtained by using linear programming techniques. An application is provided.

Keywords: cost variation, decomposition, efficiency change, technological change, index number theory

JEL Classification: C43, D24, O12

Suggested Citation

Balk, Bert M. and Zofío, Jose L., The Decompositions of Cost Variation (May 7, 2019). ERIM Report Series Reference . Available at SSRN: https://ssrn.com/abstract=3385312 or http://dx.doi.org/10.2139/ssrn.3385312

Bert M. Balk

RSM Erasmus University ( email )

Burg Oudlaan 50
Rotterdam, 3062 PA
Netherlands

HOME PAGE: http://www.rsm.nl/bbalk

Jose L. Zofío (Contact Author)

Universidad Autónoma de Madrid ( email )

Francisco Tomás y Valiente, 5
Madrid, Madrid 28049
Spain
914972406 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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