The Farrell (1957) concept of technical efficiency can be measured in two ways--denoted output and input technical efficiency. The empirical literature does not distinguish between the two measures and confusion exists regarding the required restrictions on technology for the specification of...

The error-components approach to estimating allocative inefficiency imposes restrictive assumptions on the distributions of the errors and functional form. The parametric approach does not require special assumptions about the error distribution or technology but typically assumes technical...