Process Aggregation and Efficiency.

We analyse how the aggregation of production processes affects efficiency evaluations. A production unit can be inefficient even though all its production processes are efficient. We show how to test if observed "inefficiencies" may be caused by an aggregation and how to correct efficiency measures for such aggregation generated inefficiencies. The tests and the adjusted efficiency measurement programs involve hypothetical dis-aggregations designed to put the evaluated unit in its best possible light.