Excess-input expenditure estimated by means of an input-distance function: the case of public railways
The input-distance function is used to estimate excess-input expenditure with reference to four European public railways. This technique exploits the properties of the input-distance function and allows excess-input cost to be estimated over a minimum level, rather than excess-input usage. This simplifies the computation of the cost of allocative inefficiency, making the estimations easier and more reliable. The results for the four railway systems reveal a substantial and statistically significant input expenditure in excess over the minimum level. When evaluated over the whole sample period, 1971-87, however, differences between the four systems reduce over time. All of the public railway systems show a clear tendency towards the reduction of inefficiency, independent of dimension.