Intertemporal Budgeting and Efficiency

This paper introduces an intertemporal variable cost indirect technology which permits technological change over time, as well as allowing for intertemporal financial flexibility. It characterizes firms or agencies which maximize outputs or services subject to a budget constraint. We define intertemporal Farrell-type output oriented technical efficiency under several different financial regimes, as well as efficiency gains from financial flexibility. An empirical illustration is included based on a sample of Illinois municipalities.