Estimating the technical efficiency of a firm by eliminating the effects of exogenous factors
AbstractThe paper discusses the problem of estimating technical efficiency in a way objective from the standpoint of firms. Such estimation is possible if the effect of factors uncontrollable by the firm is eliminated. To carry out the corresponding analysis a system of factors of technical efficiency and possibilities for solving this system are presented. An approach based on a deterministic model of the effect of factors noncontrollable by the firm is recommended. The application of this technique is possible in case of limited information when only time-series data can be used. In connection with this also the way technical efficiency is to be estimated is referred to. For practical application of this approach an optimal programming problem is formulated. A numerical example is given.
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Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 3 (1990)
Issue (Month): 2 (Autumn)
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- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Schmidt, Peter & Knox Lovell, C. A., 1979. "Estimating technical and allocative inefficiency relative to stochastic production and cost frontiers," Journal of Econometrics, Elsevier, vol. 9(3), pages 343-366, February.
- Danilin, V I, et al, 1985. "Measuring Enterprise Efficiency in the Soviet Union: A Stochastic Frontier Analysis," Economica, London School of Economics and Political Science, vol. 52(206), pages 225-33, May.
- Banker, Rajiv D & Maindiratta, Ajay, 1988. "Nonparametric Analysis of Technical and Allocative Efficiencies in Production," Econometrica, Econometric Society, vol. 56(6), pages 1315-32, November.
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