TITLE:
Efficient Frontier via Production Functions and Mechanization
AUTHORS:
Hideki Nakamura
KEYWORDS:
Production Process Steps, Leontief Production Function, Mechanization, Efficient Frontier, Production below the Efficient Frontier
JOURNAL NAME:
American Journal of Operations Research,
Vol.7 No.1,
January
19,
2017
ABSTRACT: This study attempts to reconcile data envelopment analysis (DEA) with the production function approach in economics. We examine not only the inputs of capital and labor, but also the ranges of these inputs in production process steps, and endogenously derive a Leontief production function. The Leontief production functions shift northeasterly owing to mechanization, which is the replacement of labor inputs by capital inputs in some steps. Consequently, we describe the efficient frontier as the convex hull of the Leontief production functions. Furthermore, we consider the possibility of efficient production below the efficient frontier.