In this paper we propose an empirically implementable measure of aggregate-level efficiency along the lines of Debreu's (1951) coefficient of resource utilization but restricted to the production side. The efficiency measure is based on directional distance functions, which allows the overall measure of efficiency to be decomposed into measures of technical and "structural" efficiency. The latter measure, which captures inefficiencies associated with the organization of production within an industry, is further decomposed into measures of scale and mix efficiency. The measures developed in the paper are illustrated using U. S. hospital data. The illustration sheds light on the efficacy of certificate of need (CON) regulations.

In this brief communiction we respond to comments on our earlier publication, which contained some notational errors.

Excess capacity can be viewed as wasteful (an unnecessary cost) or as prudential (a ready source of supply). The role of excess capacity is an important issue at the individual firm level as well as at the community level. In this paper we explore hospital capacity for a sample hospitals operating in the 15 largest standard metropolitan statistical areas (SMSAs) in the U.S. during 2002. Using Johanson's (1968, Production Functions and the Concept of Capacity, Namur, Belgium, Recherches R,centes sur le Fonction de Production (Collection, Economie Mathematique et Econometrie no. 2). [Reprinted in Finn R. Forsund (ed) (1987) The Collected Works of Leif Johanson, vol 1. Amsterdam, North-Holland, pp 350-282]) notion of capacity as the maximum rate of output possible from fixed inputs (i.e., without restrictions on variable inputs), we measure capacity in a frontier setting using directional distance functions. Rather than attempt to determine the "optimal" level of hospital capacity, we instead quantify capacity and capacity utilization rates at both the individual hospital and, by aggregating, the SMSA levels. After determining capacity and capacity utilization rates, we then introduce a model that calculates the changes in variable inputs that would be needed to utilize excess capacity. Finally, we introduce a simulation model that is used to examine whether each SMSA has enough "excess" hospital capacity to accommodate the loss of one of its five largest hospitals. The approach developed in this study should be of value to decision makers and planners in a variety of fields.

This paper calculates both static and dynamic measures of productivity for a sample of Yugoslav enterprises over the five-year period 1975–1979 using Farrell measures of efficiency and the frontier Malmquist index of productivity change. The influences of market share, export orientation, joint ventures, labor groupings, capital intensity, and regional development on the static efficiency measures and on the dynamic Malmquist index and its components are also examined. We find that the analysis of single-period efficiency scores does not necessarily provide much insight into performance over time.J. Comp. Econom.,December 1998, 26(4), pp. 805–821. University of Arkansas, Fayetteville, Arkansas 72701; University of Southern Mississippi, Hattiesburg, Mississippi 39406; and University of Arkansas, Fayetteville, Arkansas 72701.