Causality between Technical and Allocative Efficiencies: An Empirical Testing
In: Journal of economic studies, Band 19, Heft 2
ISSN: 1758-7387
In production economics, one of the most interesting questions is that of
the causal relationship between technical
efficiency and allocative efficiency. This as yet remains a puzzle without a
unique answer. There are a few theoretical analyses conceptualizing the
relationship, but consensus has not yet been reached, and empirical tests are
rare. Presents the empirical results of applying Granger's (1969) and
Sims' (1972) causality tests using time series data on technical and
allocative efficiencies of random samples of Indian farmers. These causality
tests, with respect to technical and allocative
effciences show that there is unidirectional causality from
technical efficiency to allocative efficiency, and that the causative process is
not bidirectional.