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physical units of production (outputs) by the physical units of factors consumed
(inputs). So, the more the productivity, the more the production per unit of input
consumed. The concept of efficiency is more demanding, as to be fully efficient,
your level of productivity has to be the best possible. In other words, to do estimations of productive efficiency, you need to compare your own level of productivity
with that coming from other producers. Once verified no other producer has the
ability to operate with better productivity than you, then you can confirm you are
fully efficient. This is the concept of productive efficiency (or technical efficiency);
there are other possible definitions as, for instance, cost revenue or profit efficiency
when we add to the physical units of outputs and inputs additional variables referring mainly to the output and input prices.
Paying attention to the existent seminal works, one can cite Koopmans (1951).
Koopmans provided a well-founded definition of technical efficiency by indicating
“a producer is technically efficient if an increase in any output requires a reduction
in at least one other output or an increase in at least one input, and if a reduction in
any input requires an increase in at least one other input or a reduction in at least one
output” (Koopmans (1951), page 60).
There are other formal definitions of technical efficiency. For instance, it is worth
citing Debreu (1951) and Farrell (1957) who introduced a less demanding indicator
of technical efficiency that refers to the maximum radial (proportional) reduction in
all inputs that continues providing a determined level of output. This means that a
score of unity serves to identify the existence of technical efficiency. When this is
not the case, a score less than unity serves to exhibit the presence of technical inefficiency. This Debreu–Farrell definition is based on the inputs contraction (meaning,
it is an input-oriented indicator). Reversing, the terms, we can also define an outputoriented indicator by accepting an expansion of the output variables by keeping
constant the inputs.
So, different than productivity, efficiency indicators determine the existent distance between a determined level of outputs and inputs and the specific level of
outputs and inputs that are required to define the best possible combination that
serves to configure the best practice frontier of the existent technology. As indicated, the input-oriented indicator exhibits the necessary input reduction to become
efficient, keeping constant the outputs. In contrast, the output-oriented indicator
signals the required output expansion but keeping constant the inputs. There are
other extensions, the so-called directional distance functions, that combine changes
in inputs and outputs, but their formal definitions are more complex, and we will not
use them in our empirical work.
Let’s start with the definition process of the indicator of efficiency (or ecoefficiency) we are going to follow in the empirical work. To do this, we follow
Farrell who defined his indicator of technical efficiency by postulating a convex
technology of the production side. This initial definition has been expanded in order
to provide more possible methodological choices:
1. Deterministic frontier analysis by using parametric production functions (DFA).
The seminal work on this direction is Aigner and Chu (1968).
7 Management of Waste Electrical and Electronic Equipment in European Union…
physical units of production (outputs) by the physical units of factors consumed
(inputs). So, the more the productivity, the more the production per unit of input
consumed. The concept of efficiency is more demanding, as to be fully efficient,
your level of productivity has to be the best possible. In other words, to do estimations of productive efficiency, you need to compare your own level of productivity
with that coming from other producers. Once verified no other producer has the
ability to operate with better productivity than you, then you can confirm you are
fully efficient. This is the concept of productive efficiency (or technical efficiency);
there are other possible definitions as, for instance, cost revenue or profit efficiency
when we add to the physical units of outputs and inputs additional variables referring mainly to the output and input prices.
Paying attention to the existent seminal works, one can cite Koopmans (1951).
Koopmans provided a well-founded definition of technical efficiency by indicating
“a producer is technically efficient if an increase in any output requires a reduction
in at least one other output or an increase in at least one input, and if a reduction in
any input requires an increase in at least one other input or a reduction in at least one
output” (Koopmans (1951), page 60).
There are other formal definitions of technical efficiency. For instance, it is worth
citing Debreu (1951) and Farrell (1957) who introduced a less demanding indicator
of technical efficiency that refers to the maximum radial (proportional) reduction in
all inputs that continues providing a determined level of output. This means that a
score of unity serves to identify the existence of technical efficiency. When this is
not the case, a score less than unity serves to exhibit the presence of technical inefficiency. This Debreu–Farrell definition is based on the inputs contraction (meaning,
it is an input-oriented indicator). Reversing, the terms, we can also define an outputoriented indicator by accepting an expansion of the output variables by keeping
constant the inputs.
So, different than productivity, efficiency indicators determine the existent distance between a determined level of outputs and inputs and the specific level of
outputs and inputs that are required to define the best possible combination that
serves to configure the best practice frontier of the existent technology. As indicated, the input-oriented indicator exhibits the necessary input reduction to become
efficient, keeping constant the outputs. In contrast, the output-oriented indicator
signals the required output expansion but keeping constant the inputs. There are
other extensions, the so-called directional distance functions, that combine changes
in inputs and outputs, but their formal definitions are more complex, and we will not
use them in our empirical work.
Let’s start with the definition process of the indicator of efficiency (or ecoefficiency) we are going to follow in the empirical work. To do this, we follow
Farrell who defined his indicator of technical efficiency by postulating a convex
technology of the production side. This initial definition has been expanded in order
to provide more possible methodological choices:
1. Deterministic frontier analysis by using parametric production functions (DFA).
The seminal work on this direction is Aigner and Chu (1968).
7 Management of Waste Electrical and Electronic Equipment in European Union…