Symmetric Decompositions of Cost Variation

In this paper a number of symmetric, empirically implementable decompositions of the cost variation (in difference and ratio form) of a production unit are developed. The components distinguished are price level change, technical efficiency change, allocative efficiency change, technological change, scale of activity change, and price structure change. Given data from a (balanced) panel of production units, all the necessary ingredients for the computation of the various decompositions can be obtained by using linear programming techniques (DEA). An application is provided.