New methodology revolutionizes efficiency studies in economics, boosting productivity and profits.
Efficiency in economics has been a big focus for researchers, looking at how well different economic activities are being done. This study looks at how the methods for measuring efficiency have changed over time. Before 1957, there wasn't a standard way to measure efficiency. Now, we use different methods like production, cost, profit, revenue, and distance functions. There are two main ways to analyze efficiency: econometric methods and non-parametric data envelopment analysis. The best way to measure efficiency depends on how much the input quantities vary. Overall, the input distance function is the best method for measuring efficiency when input quantities don't vary much.