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Citation Information

Type Working Paper - University of Connecticut
Title A Reverse Directional Distance Function to Reconcile Between Competing Efficiency Goals: An Application to Indian Manufacturing
Publication (Day/Month/Year) 2017
URL http://web2.uconn.edu/economics/working/2017-08.pdf
In analysis of technical efficiency in production, either the maximum proportional increase in all outputs
or a minimal proportional scaling down of all inputs is generally selected as the criterion. In the recent
literature, the Directional Distance Function combines the two objectives by increasing output and
reducing input simultaneously to the extent possible. This paper introduces a Reverse Directional
Distance Function as one possible approach to resolve the conflict between incompatible goals through a
minimal adjustment applicable to both of the two objectives. In our empirical analysis we apply the
proposed method to Indian manufacturing where increasing the output and conserving energy use are both
highly important objectives. A comparison of the feasible targets obtained through the conventional and
the Reverse Directional Distance Functions yields an estimated tradeoff between output increase and CO2
reduction (due to energy conservation) along the frontier.

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