Aggregation of metafrontier technology gap ratios: the case of European sectors in 1995-2015

Metafrontier-based methodologies have gained in popularity to assess the technology gaps of Decision Making Units (DMUs). One important indicator in this context is the technology gap ratio at the group level. Indeed, in metafrontier contexts, DMUs are partitioned into groups, capturing the heterogeneity present between DMUs. To date, no aggregation scheme has been suggested for this task. In practice, the arithmetic average is used. In this paper, we propose an alternative aggregation procedure, based on economic optimisation behaviour, given by the model, and easy to use and to interpret in practice. We apply our method to the case of 10 European sectors during the period 1995-2015. It represents a unique opportunity to apply the metafrontier methodology, and in particular, our aggregation scheme to sectors over a long period. Our findings reveal important patterns useful for policy-makers. (C) 2018 Elsevier B.V. All rights reserved.