Aggregation of Cost Efficiency: Indicators and Indexes Across Firms

In this paper we ask whether cost efficiency Farrell indexes (which are ratio measures) and cost efficiency indicators (which are difference measures) can be aggreaga ted from firm to industry. The answer is positve; however, if we wish to aggregate the technical and allocative efficiency components, the answer is not so simple, especially for the index measures. We conclude that the indicator approach is preferred to the index approach with respect to aggregation.