The denominator rule for share-weighting aggregation

Abstract

In this paper we prove that the denominator rule, namely that weighting shares should be defined in term of the denominator variable of the relevant index, is a necessary and sufficient condition for consistent arithmetic aggregation of any ratio-type performance measures, including efficiency indices. We then illustrate the applicability of the denominator rule in the aggregation of scale efficiency, measures of the effect of input congestion, and of capacity utilization indices.