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Fractional regression models for second stage DEA efficiency analyses

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  • Esmeralda Ramalho

    ()

  • Joaquim Ramalho
  • Pedro Henriques

Abstract

Data envelopment analysis (DEA) is commonly used to measure the relative efficiency of decision-making units. Often, in a second stage, a regression model is estimated to relate DEA efficiency scores to exogenous factors. In this paper, we argue that the traditional linear or tobit approaches to second-stage DEA analysis do not constitute a reasonable data-generating process for DEA scores. Under the assumption that DEA scores can be treated as descriptive measures of the relative performance of units in the sample, we show that using fractional regression models are the most natural way of modeling bounded, proportional response variables such as DEA scores. We also propose generalizations of these models and, given that DEA scores take frequently the value of unity, examine the use of two-part models in this framework. Several tests suitable for assessing the specification of each alternative model are also discussed.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s11123-010-0184-0
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Bibliographic Info

Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 34 (2010)
Issue (Month): 3 (December)
Pages: 239-255

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Handle: RePEc:kap:jproda:v:34:y:2010:i:3:p:239-255

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Web page: http://www.springerlink.com/link.asp?id=100296

Related research

Keywords: Second-stage DEA; Fractional data; Specification tests; One outcomes; Two-part models; C12; C13; C25; C51;

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  1. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May.
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  4. Cinzia Daraio & Léopold Simar, 2005. "Introducing Environmental Variables in Nonparametric Frontier Models: a Probabilistic Approach," Journal of Productivity Analysis, Springer, vol. 24(1), pages 93-121, 09.
  5. Kneip, Alois & Park, Byeong U. & Simar, L opold, 1998. "A Note On The Convergence Of Nonparametric Dea Estimators For Production Efficiency Scores," Econometric Theory, Cambridge University Press, vol. 14(06), pages 783-793, December.
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  7. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
  8. Valentin Zelenyuk & Vitaliy Zheka, 2006. "Corporate Governance and Firm’s Efficiency: The Case of a Transitional Country, Ukraine," Journal of Productivity Analysis, Springer, vol. 25(1), pages 143-157, 04.
  9. Gourieroux Christian & Monfort Alain & Trognon A, 1982. "Pseudo maximum lilelihood methods : applications to poisson models," CEPREMAP Working Papers (Couverture Orange) 8203, CEPREMAP.
  10. Laure Latruffe & Sophia Davidova & Kelvin Balcombe, 2008. "Application of a double bootstrap to investigation of determinants of technical efficiency of farms in Central Europe," Journal of Productivity Analysis, Springer, vol. 29(2), pages 183-191, April.
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Citations

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Cited by:
  1. Léopold Simar & Paul Wilson, 2011. "Two-stage DEA: caveat emptor," Journal of Productivity Analysis, Springer, vol. 36(2), pages 205-218, October.
  2. Amparo Soler Domínguez & Juan Carlos Matallín Sáez & Emili Tortosa-Ausina, 2013. "Does active management add value? New evidence from a quantile regression approach," Working Papers. Serie EC 2013-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  3. Gelan, Ayele & Muriithi, Beatrice Wambui, 2010. "Measuring and Explaining Technical Efficiency of Dairy Farms: A Case Study of Smallholder Farms in East Africa," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96187, African Association of Agricultural Economists (AAAE) & Agricultural Economics Association of South Africa (AEASA).
  4. Haucap, Justus & Muck, Johannes, 2013. "What drives the relevance and reputation of economics journals? An update from a survey among economists," DICE Discussion Papers 103, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  5. Joaquim Ramalho & Jacinto Vidigal da Silva, 2011. "Functional form issues in the regression analysis of financial leverage ratios," CEFAGE-UE Working Papers 2011_28, University of Evora, CEFAGE-UE (Portugal).
  6. Tsolas, Ioannis E., 2014. "Precious metal mutual fund performance appraisal using DEA modeling," Resources Policy, Elsevier, vol. 39(C), pages 54-60.
  7. Glenngård, Anna Häger, 2013. "Productivity and patient satisfaction in primary care—Conflicting or compatible goals?," Health Policy, Elsevier, vol. 111(2), pages 157-165.
  8. J. Carlos Matallín-Sáez & Amparo Soler-Domínguez & Emili Tortosa-Ausina, 2013. "Does active management add value? New evidence from a quantile regression," Working Papers 2013/01, Economics Department, Universitat Jaume I, Castellón (Spain).
  9. Baldos, Uris Lantz C. & Hertel, Thomas W., 2012. "Economics of global yield gaps: A spatial analysis," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124978, Agricultural and Applied Economics Association.
  10. Santín, Daniel & Sicilia, Gabriela, 2012. "The educational efficiency drivers in Uruguay: Findings from PISA 2009," MPRA Paper 48420, University Library of Munich, Germany.
  11. Calogero Guccio & Giacomo Pignataro & Ilde Rizzo, 2014. "Evaluating the efficiency of public procurement contracts for cultural heritage conservation works in Italy," Journal of Cultural Economics, Springer, vol. 38(1), pages 43-70, February.

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