# José L. ZofíoUniversidad Autónoma de Madrid | UAM · Economics

José L. Zofío

PhD

Studying economic models from a productivity and efficiency perspective using index number theory.

## About

123

Publications

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Introduction

I am Professor of Economics at the Universidad Autónoma de Madrid, and former Chair of the Department of Economics (Economic Theory and Economic History). Currently I am also Visiting Professor at Erasmus University and Wageningen University and Research, and Visiting Fellow to the Erasmus Research Institute of Management ERIM, https://www.erim.eur.nl/people/jose-zofio-prieto), where I collaborate with academics from the Rotterdam School of Management, https://www.rsm.nl/people/jose-zofio-prieto

**Skills and Expertise**

Additional affiliations

October 2017 - present

**Erasmus Research Institute of Manegement (ERIM)**

Position

- Visiting member

January 1997 - present

## Publications

Publications (123)

We introduce benchmarking analysis based on state-of-the-art machine learning techniques applied to the measurement of efficiency to assess the performance of Higher Education Institutions (HEIs). We rely on Efficiency Analysis Trees (EAT) and its Convexified frontier counterpart (CEAT) to assess the efficiency of 144 private HEIs in Colombia and c...

This paper contributes to the literature with a methodology that helps identify the functions that constrain the overall performance of an innovation system, hence providing clear guidelines to policymakers on the direction of their interventions. This methodology relies on the notion of penalty for bottleneck, which is defined as the
weakest link...

Considering any graph technical inefficiency measure, we show that the so-called standard or traditional approach for decomposing profit inefficiency relying on Fenchel-Mahler inequalities obtained from duality theory, establishes that profit inefficiency is greater than or equal to the product of technical inefficiency times a positive factor expr...

The traditional approach decomposing profit inefficiency into the sum of its technical and its allocative components identifies first the frontier projection of each firm based on the exogenous choice of a specific technical measure, e.g., based on slacks, directional, etc. However, in real life situations, firms and organizations are interested in...

We introduce two desirable properties concerning the allocative efficiency term in the decomposition of economic efficiency. Since Farrell, economic efficiency, defined in terms of the cost, revenue, profitability, or profit functions, is decomposed into a technical efficiency measure and allocative efficiency. Resorting to duality theory, allocati...

We introduce complementary decompositions of profit change that, relying on the duality between the profit function and the directional distance function, shed light on the different sources of profit growth including measures of technical efficiency, allocative efficiency and technological change. Our decompositions extend the literature on Konüs...

Based on a micro-founded gravity equation and resorting to a new database of interregional trade flows within European Union countries, we study the asymmetric concentration of inflows in importing regions when exports come from regions with different geographical advantages in terms of their accessibility to the international border. As a case stu...

The Eco-Cooperative Adaptive Cruise Control (Eco-CACC) makes use of an algorithm to compute energy-optimized speed profiles within the vicinity of signalized intersections. We conduct a stated choice experiment to unveil the inclination of drivers towards the Eco-CACC and to calculate its potential market share. To do so, we consider the performanc...

The conventional dynamic cost inefficiency model relies on the directional distance function with an exogenous directional vector to measure technical and allocative inefficiency. However, this approach may lead to contradictory recommendations for firms to become technically and allocatively efficient. By definition, the conventional model forces...

We present the results of an experimental investigation on incentives to adopt cleaner abatement technologies in the presence of imperfect compliance. We consider two emission control instruments—emission taxes and tradable permits—as well as different combinations of the inspection probability and fine for non-compliance, which can result in full...

The reverse directional distance function, shortly RDDF, is a relatively recent concept introduced by Pastor et al. (2016). It is an apparently simple idea and, at the same time, a fruitful one. Let us start considering an efficiency measure (EM) and a finite sample of firms to be analyzed, FJ. As we have shown throughout most of the previous chapt...

The usual and well-established methods, explained and used in most of the previous chapters, for deriving a specific overall economic inefficiency decomposition associated with a given technical efficiency measure (multiplicative or additive), which we refer to as the traditional approaches, rely on the same “modus operandi”; i.e., they are based o...

The canonical model of perfect competition, resulting in social welfare maximization, assumes all kinds of technical and allocative inefficiencies away. In equilibrium, economic theory establishes that in contestable markets, competition forces draw firms towards profit maximization (Vickers, 1995). This in turn requires that, on one hand, firms ex...

The enhanced Russell graph measure, ERG, (Pastor et al., 1999) was designed as a new global efficiency measure to overcome the computational difficulties of the Russell graph measure of technical efficiency, RG (Färe et al., 1985). Historically, Farrell (1957) implemented the first measure of technical efficiency, while Färe and Lovell (1978), afte...

Over past decades, one of the aspects related to the measurement of technical efficiency that has attracted the attention of Data Envelopment Analysis (DEA) researchers for the last decades has been the development of the generalized efficiency measures (GEMs), also called graph measures. The initial motivation for these measures was the design of...

From the beginning of DEA as a well-defined multi-output-multi-input tool for measuring efficiency, a huge number of technical efficiency measures have been introduced in the literature. Each of them implements a different way of gauging the “distance” from a firm in the interior of the technology to its efficient frontier (radially, hyperbolically...

This chapter is concerned with the measurement of profitability efficiency, defined as the ratio of revenue to cost, and its multiplicative decomposition into a productive efficiency measure—including technical and scale efficiencies, corresponding to the generalized distance function introduced by Chavas and Cox (1999), and allocative efficiency....

Data Envelopment Analysis can determine both a technical efficiency score and benchmarking information on how to change inputs and outputs to reach the efficient frontier if the firm under evaluation is technically inefficient. All measures studied in this book resort to the determination of benchmarking information through the calculation of the f...

After the introduction in the Data Envelopment Analysis literature of the radial measures, other approaches and ways of measuring the distance from a firm to the efficient frontier were defined, with the aim of solving certain drawbacks of the radial ones. On the one hand, radial measures are too restrictive in the sense that each assessed unit is...

The birth of the directional distance function as an inefficiency measure was linked to the consumer theory work developed by Luenberger in the early 1900s. Luenberger (1992a) introduced the concept of the benefit function in consumer theory in order to develop group welfare relations and, particularly, considered the Shephard’s input distance func...

In this chapter, we summarize the analytical framework found in the book by presenting the main concepts in an intuitive and accessible way while relying on supporting graphical illustrations to ease comprehension. Arguably, the measurement of economic efficiency dates back to the seminal paper by Farrell (1957), who introduced the definition, deco...

As we showed in Chap. 8, by duality, the directional distance function (DDF) is related to a measure of profit inefficiency that is calculated as the normalized deviation between optimal and actual profit at market prices. However, in the most usual case where the selected directional vector corresponds to the observed values in inputs and outputs...

In this chapter, we present the classic approach to calculate and decompose cost and revenue efficiency based on Shephard’s radial input and output distance functions. These decompositions follow closely the presentation done in Chap. 2 where both economic efficiency measures can be separated into technical and allocative components, i.e., expressi...

Cross-efficiency measurement is an extension of Data Envelopment Analysis that allows for tie-breaking ranking of the Decision Making Units (DMUs) using all the peer evaluations. In this article we examine the theory of cross-efficiency measurement by comparing a selection of methods popular in the literature. These methods are applied to performan...

Empirical evidence has been lacking to explain trade agglomerations within countries. Starting with a novel micro-database of road freight shipments between Spanish municipalities for the period 2003–07, we break down city (municipal) trade flows into the extensive and intensive margins and assess trade frictions and trade concentration relying on...

We render operational the model outlined by Carter (1990) via the introduction of the research methods necessary for studying the spatial and sectoral (upstream and downstream) benefits of productivity-enhancing innovations within a real interregional input–output framework. As case study we examine the reduction in production costs derived from th...

We contribute to the literature on the assessment of innovation systems by relating the amount of inputs available to the system and its performance through the concept of returns to scale (increasing, constant or decreasing). We study to what extent the size or scale of innovation systems relates to their performance, which is estimated through fr...

This article studies the creation and consolidation of a trademark system tantamount to market integration and commercial specialization of Spanish regions from 1850 to 1920. We analyse the first 47,000 registrations, their geographical distribution and the drivers behind this trademark expansion. By using a lineal probability model, we find that k...

The determination of technical efficiency through the previous estimation of a production frontier has been a relevant topic in the literature related to production theory and engineering. Many parametric and nonparametric approaches have been introduced in the last forty years for estimating production frontiers given a data sample. However, few o...

This paper is concerned with introducing a series of new concepts under the name of Economic Cross-Efficiency, which is rendered operational through Data Envelopment Analysis (DEA) techniques. To achieve this goal, from a theoretical perspective, we connect two key topics in the efficiency literature that have been unrelated until now: economic eff...

The Data Envelopment Analysis Toolbox is a new package for MATLAB that includes functions to calculate the main data envelopment analysis models. The package includes code for the standard radial input, output and additive measures, allowing for constant and variable returns to scale, as well as recent developments related to the directional distan...

This study introduces the measurement of environmental inefficiency from an economic perspective. We develop our proposal using the latest by-production models that consider two separate and parallel technologies: a standard technology generating good outputs, and a polluting technology for the by-production of bad outputs. While research into envi...

Overall efficiency measures were introduced in the literature for evaluating the economic performance of firms when reference prices are available. These references are usually observed market prices. Recently, Aparicio and Zofío (2019) have shown that the result of applying cross-efficiency methods (Sexton et al., 1986), yielding an aggregate mult...

In this paper a number of symmetric, empirically implementable decompositions of the cost variation (in difference and ratio form) of a production unit are developed. The components distinguished are price level change, technical efficiency change, allocative efficiency change, technological change, scale of activity change, and price structure cha...

Total Factor Productivity Toolbox is a new set of functions to calculate the main Total Factor Productivity (TFP) indices and their decompositions, based on Shephard’s distance functions, and using Data Envelopment Analysis (DEA) programming techniques. The package includes code for the standard Malmquist, Moorsteen–Bjurek, price-weighted and share...

In this paper, we present the results of an experimental investigation on incentives to adopt advanced abatement technologies in the presence of imperfect compliance. We consider two policy scenarios to reduce emissions, namely pollution taxes and emission permits, as well as different combinations of the inspection probability and the fine for non...

The European Union (EU) annually publishes an Innovation Union Scoreboard (IUS) as a tool to measure the innovation performance of EU Member States by means of a composite index, called the Summary Innovation Index (SII). The SII is constituted by an average of 25 indicators. The SII is claimed to rank Member States according to their innovation pe...

Total factor productivity change, here defined as output quantity change divided by input quantity change, is the combined result of (technical) efficiency change, technological change, a scale effect, and input and output mix effects. Sometimes allocative efficiency change is supposed to also play a role. Given a certain functional form for the pr...

We analyze the effects of local market size and accessibility on the spatial distribution of economic activity and wages in general equilibrium trade models with many asymmetric countries and costly trade for all goods. In models with a homogeneous sector, local market size is generally more strongly correlated with a country's industry share, wher...

This article examines the extent to which national institutional quality affects bilateral sectoral trade flows, as well as whether the conditioning role of institutions for trade has been waxing or waning with time. Based on a new trade theory framework, we derive a sectoral gravity equation, including novel variables corresponding to the exporter...

This paper introduces a multi-country multi-regional model that allows the evaluation of the effects of trade openness in the distribution of economic activity across regions within countries. Relying on the agglomeration and dispersion forces characterizing the analytical framework of the New Economic Geography and New Trade Theory (neg/ntt) liter...

In the early 1980’s Kopp and Diewert proposed a popular method to decompose cost efficiency into allocative and technical efficiency for parametric functional forms based on the radial approach initiated by Farrell. We show that, relying on recently proposed homogeneity and duality results, their approach is unnecessary for self-dual homothetic pro...

Purpose The accessibility of a certain place can evolve eitheras the direct result of transport changes or as a consequence ofthe spatial redistribution of economic activities. These twofactors are often indis tinguishable—especially at r egionallevel— since improved infrastructure stimulates relocation ofactivities. Moreover, infrastructure invest...

Over the last twenty years an increasing number of studies have relied on the standard definition of the Malmquist-Luenberger index proposed by Chung et al. (1997) [J. Environ. Manage., 51, 229-240], to assess environmental sensitive productivity change. While recent contributions have shown that it suffers from relevant drawbacks related to incons...

Panel Data Toolbox is a new package for MATLAB that includes functions to estimate the main econometric methods of panel data analysis. The package includes code for the standard fixed, between and random effects estimation methods, as well as for the existing instrumental panel and new spatial panel. This paper describes the methodology and implem...

The concept of loss distance functions is introduced and compared with other functional representations of
the technology including the Hölder metric distance functions (Briec and Lesourd in J Optim Theory Appl
101(1):15–33, 1999), the directional distance functions due to Chambers et al. (J Econ Theory 70(2):407–
419 1996; J Optim Theory Appl 98(2...

The production function approach is used to introduce the effect of public infrastructure on economic growth focusing on its spillover effects. We improve the existing literature both from a conceptual and methodological perspective. As regressors we incorporate variables related to the new concepts of internal and imported transport infrastructure...

Cost or revenue efficiency measurement based on the approach initiated by Farrell has received great attention from academics and practitioners since the fifties. Farrell's approach decomposes cost efficiency into two different sources, viz. technical efficiency and allocative efficiency. Technical efficiency is estimated by means of the Shephard i...

We use the multiregional core-periphery model of the new economic geography to analyze and compare the agglomeration and dispersion forces shaping the location of economic activity for a continuum of network topologies characterized by their degree of centrality, and comprised between two extremes represented by the homogenous (ring) and the hetero...

Accessibility, the relative access to markets, is a strategic concept in all economic models with a spatial dimension and its prominence has been acknowledged in many economic research fields and policy debates. This paper is based on the assumption that infrastructure drives economic accessibility and, therefore, we can assimilate a production fun...

We propose a new approach to estimate technical coefficients from a set of Decision Making Units (DMUs) under the assumption that their production plans are set by process engineers through Linear Programming (LP) techniques. The idea behind this approach is that most manufacturing and agricultural firms routinely resort to LP-based modeling in the...

We discuss how to properly decompose economic efficiency when the underlying technology is nonhomothetic
using alternative allocative and technical efficiency criteria. We first show that only under
the production of one output and assuming the particular case of constant returns to scale homotheticity,
we may claim that the standard radial models...

The importance of the transport costs for micro and macro geographical analyses regarding economic accessibility, interterritorial trade patterns, or regional localization and productive specialization, is nowadays paramount. Many studies have been devoted to defining and measuring transport costs from the point of view of a static cross-section pe...

We rely on the economic theory approach to index numbers to
improve the existing definitions and decompositions of variations in
generalized transport costs (GTCs). As a value index, we decompose GTCs
into price and quantity indices associated to economic market costs and infraestructure variables distance and time within a network. The methodology...

Relying on stochastic frontier analysis we propose a methodology to study the technological characteristics and cost efficiency levels related to the provision of public infrastructure for basic utilities. The methodology assumes a cost minimizing behaviour on the part of public officials when planning the construction of local infrastructure, whic...

Álvarez-Ayuso I. C., Condeço-Melhorado A. M., Gutiérrez J. and Zofío J. L. Integrating network analysis with the production function approach to study the spillover effects of transport infrastructure, Regional Studies. The production function approach is used to analyse the role of transport infrastructure on regional gross domestic product (GDP)...

Determination of optimal population densities underlies the economic rationality when planning the provision of basic public infrastructure by local governments. Using econometric techniques based on the translog cost function, we investigate the existence of economies of scale, associated to a larger urban size in terms of population and housing,...

The directional distance function has been introduced in the efficiency literature with the intention of relaxing the fixed orientations represented by its classical input and output counterparts. However, the criteria underlying the choice of its associated directional vector are numerous. When market prices are observed and firms have a profit ma...

Apart from the well-known weaknesses of the standard Malmquist productivity index related to infeasibility and not accounting for slacks, already addressed in the literature, we identify a new and significant drawback of the Malmquist–Luenberger index decomposition that questions its validity as an empirical tool for environmental productivity meas...

This paper analyzes the provision of local public infrastructure from the technical and economic perspectives in low-density urban settlements, i.e., municipalities. These areas, characterized by their rural nature, are classified as: (i) dispersed and disadvantaged by the European Union, (ii) eccentric and/or remote by the OECD, and (iii) unfavora...

This paper evaluates to what extent policy-makers have been able to promote the creation and consolidation of comprehensive research groups that contribute to the implementation of a successful innovation system. Malmquist productivity indices are applied in the case of the Spanish Food Technology Program, finding that a large size and a comprehens...

This study presents a simulation model, based on input-output techniques, using the Spanish satellite account on Information and Communications Technologies (ICT): CS-TIC 2005–2009, for calculating the direct, indirect and induced effects related to an increase in final demand in ICT goods and services. The macroeconomic effects of the implementati...

Relying on efficiency analysis, we evaluate to what extent policy makers have been able to promote the establishment of consolidated and comprehensive research groups to contribute to the implementation of a successful innovation system for the Spanish food technology sector, oriented to the production of knowledge based on an application model. Us...

We use the economic theory approach to index numbers in order to improve the existing definitions and decompositions of generalized transport costs (GTCs), and thus to obtain a better understanding of their economic and infrastructure determinants. Using this approach we accurately measure the contribution made to reducing GTCs by the variation in...

Tesis doctoral inédita de la Universidad Autónoma de Madrid. Facultad de Ciencias Económicas y Empresariales, Departamento de Análisis Económico. Fecha de lectura: 15-12-2000 Bibliogr.: h. 357-368

We study the incentives to adopt advanced abatement technologies in the presence of imperfect compliance. Interestingly, incentives
under emission taxes and pollution abatement subsidies are the same that in the perfect compliance scenario. However, under
emission standards imperfect compliance can increase firms’ incentives to invest, whereas unde...

Relying on efficiency analysis we evaluate to what extent policy makers have been able to promote the establishment of consolidated and comprehensive research groups to contribute to the implementation of a successful innovation system for the Spanish food technology sector, oriented to the production of knowledge based on an application model. Usi...

Determination of the optimal city size underlies the economic rationality of infrastructure provision by local governments. We investigate the existence of decreasing average costs resulting from economies of scale, associated with larger urban dimensions in terms of population and housing, and economies of density, brought about by reductions in u...

The economic and environmental gains expected from particular environmental policies based on allowances trading programs depend on how they are specifically implemented in the field. In this paper we focus on a tradable permit program based on a double auction market combined with an industry structure that presents heterogeneity in conventional a...

We introduce new specifications and estimation procedures of traditional distance functions that allow researchers to undertake environmental efficiency and productivity studies within a parametric stochastic framework. Relying on a translog distance function specification that treats the outputs' vector asymmetrically by allowing equiproportional...

Municipalities manage their budgets in a complex national, regional, and local legal framework while being under the cross-pressure between of citizens claiming for better public goods and higher-level Administrations requiring higher allocative efficiency in public spending. The legal framework determines the scheme of intergovernmental finance ba...

Las Entidades Locales desarrollan su gestión presupuestaria en un entorno complejo establecido por la normativa estatal, autonómica y local. Se encuentran condicionadas por la presión de los ciudadanos por mejores servicios públicos y por mayor nivel de eficiencia en el gasto. Las normativas establecen, mediante pautas emanadas de la Ley Reguladora...

Hasta hoy día ha existido un amplio consenso relativo a que el análisis económico ha prestado escasa atención a la localización de la actividad económica en el espacio, generando cierto desasosiego en áreas como la economía regional y el comercio internacional, donde algunos fenómenos no podían ser explicados adecuadamente por la ausencia de un mar...

El objetivo de este artículo es establecer un marco analítico riguroso que permita determinar la dimensión e importancia económica de la industria de la cultura y el ocio, con el fin de situarla en el lugar prominente que ha alcanzado como sector estratégico en la estructura productiva de España. Se pretende evaluar la contribución que esta industr...

We discuss the effects that the emergence of the new postindustrial form of flexible capitalist organization has on the Spanish labor market and, by extension, on the working life of two representative groups of employees characterized by their casual and stable working conditions. This brings a growing duality in the labor market, where individual...