has been estimated to be in the area of three percent of the GDP.
In an earlier generation of studies of US banks Berger Hunter and Timme (1993) argue that X-inefficiency
constitutes 20 percent or more of bank costs.
Within this manager-oriented tradition, Leibenstein's (1966) work on X-inefficiency
is perhaps the most radical break with IO economics.
Roger Frantz, in the concluding chapter, notes that from the late 1960s through to 2002 approximately 80 journal articles were published trying to estimate the size of X-inefficiency
and these studies consistently showed support for its existence across numerous industries and countries.
This theoretical view is consistent with that of economists who regard the technical inefficiency estimated by the stochastic frontier production model as X-inefficiency
Several chapters analyze various aspects of the problem of x-inefficiency
measures are derived, one from the stochastic cost frontier model and the other from the distribution-free model.
The term X-inefficiency
was invented by Leibenstein (1976) to distinguish technical from allocative inefficiency.
The banking literature also suggests that potential gains from the elimination of X-inefficiency
exists in most bank mergers, but are frequently not realized [26; 29; 14; 5].
However, equitable solutions may impose such costs as allocative, X-inefficiency
, dynamic inefficiency, and the cost of regulation to the firm and the regulatory agency.
antitrust, efficiency, X-inefficiency
, diseconomies, consumer welfare
Developing his concept of x-inefficiency
, Leibenstein argues that economic agents are typically producing less than they would under a relatively ideal set of circumstances, circumstances that relate quite closely to the set of industrial relations prevailing inside the firm.