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Stochastic efficiency measurement: The curse of theoretical consistency

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Abstract

The availability of efficiency estimation software – freely distributed via the internet and relatively easy to use – recently inflated the number of corresponding applications. The resulting efficiency estimates are used without a critical assessment with respect to the literature on theoretical consistency, flexibility and the choice of the appropriate functional form. The robustness of policy suggestions based on inferences from efficiency measures nevertheless crucially depends on theoretically well-founded estimates. This paper adresses stochastic efficiency measurement by critically reviewing the theoretical consistency of recently published technical efficiency estimates. The results confirm the need for a posteriori checking the regularity of the estimated frontier by the researcher and, if necessary, the a priori imposition of the theoretical requirements.

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Bibliographic Info

Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): IX (2006)
Issue (Month): (May)
Pages: 139-166

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Handle: RePEc:cem:jaecon:v:9:y:2006:n:1:p:139-166

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Keywords: functional form; stochastic efficiency analysis; theoretical consistency;

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References

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Citations

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Cited by:
  1. Kolawole Ogundari, 2010. "Estimating and analysing cost efficiency of sawmill industries in Nigeria: A stochastic frontier approach," China Agricultural Economic Review, Emerald Group Publishing, vol. 2(4), pages 420-432, November.
  2. Heerink, Nico & Bao, Xiaobin & Li, Rui & Lu, Kaiyu & Feng, Shuyi, 2009. "Soil and water conservation investments and rural development in China," China Economic Review, Elsevier, vol. 20(2), pages 288-302, June.
  3. Niquidet, Kurt & Nelson, Harry, 2010. "Sawmill production in the interior of British Columbia: A stochastic ray frontier approach," Journal of Forest Economics, Elsevier, vol. 16(4), pages 257-267, December.
  4. Saldias, Rodrigo & von Cramon-Taubadel, Stephan, 2012. "Access to credit and the determinants of technical inefficiency among specialized small farmers in Chile," DARE Discussion Papers 1211, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
  5. Carol Newman & John Rand & Finn Tarp, 2007. "Sector Switching: An Unexplored Dimension of Firm Dynamics in Developing Countries," Discussion Papers 07-22, University of Copenhagen. Department of Economics.
  6. Collier, Trevor & Johnson, Andrew L. & Ruggiero, John, 2011. "Technical efficiency estimation with multiple inputs and multiple outputs using regression analysis," European Journal of Operational Research, Elsevier, vol. 208(2), pages 153-160, January.
  7. Valeria Cosmo, 2013. "Ownership, Scale Economies and Efficiency in the Italian Water Sector," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 399-415, September.
  8. Otieno, David Jakinda & Hubbard, Lionel J. & Ruto, Eric, 2011. "Technical efficiency and technology gaps in beef cattle production systems in Kenya: A stochastic metafrontier analysis," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108947, Agricultural Economics Society.
  9. Holger Seebens & Johannes Sauer, 2007. "Bargaining power and efficiency-rural households in Ethiopia," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(7), pages 895-918.
  10. Anne-Kathrin Last & Heike Wetzel, 2010. "The efficiency of German public theaters: a stochastic frontier analysis approach," Journal of Cultural Economics, Springer, vol. 34(2), pages 89-110, May.
  11. Arne Henningsen & Christian Henning, 2009. "Imposing regional monotonicity on translog stochastic production frontiers with a simple three-step procedure," Journal of Productivity Analysis, Springer, vol. 32(3), pages 217-229, December.
  12. Mugera, Amin W. & Langemeier, Michael R. & Featherstone, Allen M., 2010. "Do Theoretical Restrictions Matter for the Translog Stochastic Production Function? Evidence from the Kansas Farm Sector," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61582, Agricultural and Applied Economics Association.
  13. Anik, Asif Reza & Breustedt, Gunnar & Bauer, Siegfried, 2011. "The Impact of Corruption on Farmers' Efficiency in Rice Production: A Natural Experiment from Bangladesh," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114224, European Association of Agricultural Economists.
  14. Imori, Denise & Guilhoto, Joaquim José Martins & Postali, Fernando Antonio Slaibe, 2012. "Eficiência técnica das agropecuárias familiar e patronal – diferenças regionais no Brasil
    [Technical efficiency of agricultural households and business - regional differences in Brazil]
    ," MPRA Paper 46954, University Library of Munich, Germany.
  15. Wollni, Meike & Brümmer, Bernhard, 2012. "Productive efficiency of specialty and conventional coffee farmers in Costa Rica: Accounting for technological heterogeneity and self-selection," Food Policy, Elsevier, vol. 37(1), pages 67-76.
  16. Imori, Denise & Guilhoto, Joaquim José Martins & Postali, Fernando Antonio Slaibe, 2012. "Production efficiency of family farms and business farms in the Brazilian regions," MPRA Paper 46995, University Library of Munich, Germany.

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