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Estimating multiple-input-- multiple-output production functions with an analysis of credit unions

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  • Long Liu
  • Jan Ondrich
  • John Ruggiero

Abstract

In this article, we develop a methodology to estimate production functions characterized by multiple inputs and multiple outputs. Aggregate output is estimated assuming a piecewise-linear production possibility set and by measuring distance to the boundary using nonparametric techniques. The parameters of the production function are then estimated in a second-stage using Ordinary Least Squares (OLS). The primary advantage of this approach is the ability to measure the output aggregate nonparametrically. The approach developed in this article is applied to estimate credit union production. An alternative approach developed by Vinod (1968) specifies an extended Cobb--Douglas equation and estimates the parameters using canonical correlation. Our new approach is compared to Vinod's canonical correlation approach.

Suggested Citation

  • Long Liu & Jan Ondrich & John Ruggiero, 2012. "Estimating multiple-input-- multiple-output production functions with an analysis of credit unions," Applied Economics, Taylor & Francis Journals, vol. 44(12), pages 1583-1589, April.
    • Handle: RePEc:taf:applec:44:y:2012:i:12:p:1583-1589
    DOI: 10.1080/00036846.2010.548784
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    Cited by:

    1. Gregory McKee & Albert Kagan, 2019. "The differential impact of the Dodd–Frank Act on niche non-metro lenders," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(4), pages 291-301, December.
    2. Galina Besstremyannaya & Jaak Simm, 2015. "Robust non-parametric estimation of cost efficiency with an application to banking industry," Working Papers w0217, New Economic School (NES).
    3. Galina Besstremyannaya & Jaak Simm & Sergei Golovan, 2017. "Robust estimation of cost efficiency in non-parametric frontier models," Working Papers w0244, Center for Economic and Financial Research (CEFIR).
    4. Galina Besstremyannaya & Jaak Simm, 2015. "Robust non-parametric estimation of cost efficiency with an application to banking industry," Working Papers w0217, Center for Economic and Financial Research (CEFIR).
    5. Galina Besstremyannaya & Jaak Simm & Sergei Golovan, 2017. "Robust estimation of cost efficiency in non-parametric frontier models," Working Papers w0244, New Economic School (NES).

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