MEASURING TECHNICAL AND SCALE INEFFICIENCIES IN THE BEER INDUSTRY - NONPARAMETRIC AND PARAMETRIC EVIDENCE

Two alternative approaches of efficiency measurement, nonparametric an d statistical, are employed to calculate three types of efficiency ind exes for the U. S. beer industry over the period 1950-1986. The result s indicate that the beer industry was operating at a high level of pur e technical efficiency over that period. The mean value of this effici ency measure is 93.7 percent based on the nonparametric approach and 8 7.5 percent based on the statistical approach. The two approaches yiel d dissimilar values and sources for overall technical inefficiency. Th e overall technical efficiency index computed under the nonparametric approach stands at 91.10 percent and the observed inefficiency is foun d to be more due to pure technical inefficiency than to scale ineffici ency. Using the statistical approach, the beer industry is found to be less overall technically efficient (68.42 percent) than indicated by the nonparametric methodology and the observed inefficiency is found t o be primarily contributed to by scale inefficiency.