Scale Elasticity in Non-Parametric DEA Approach

This contribution is an attempt to make an exhaustive critical review of various possible estimation methods of scale economies in a non-parametric data envelopment analysis approach. Three types of technology structure - piecewise linear, piecewise log-linear, and FDH - are found to be adopted for such estimation exercise. These technology structures are built up either in input-output space or in cost-output space. The strengths and weaknesses of the uses of each of these estimation methods are discussed. The issue of which method to use in any empirical application is a matter of an examination of various issues concerning 1) whether factor inputs are indivisible, 2) whether price data are available, and if available, whether they are well measured with certainty, and 3) whether the non-convexities in the underlying production technology are present