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Blaming the exogenous environment? Conditional efficiency estimation with continuous and discrete exogenous variables

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  • De Witte, Kristof
  • Mika, Kortelainen

Abstract

This paper proposes a fully nonparametric framework to estimate relative efficiency of entities while accounting for a mixed set of continuous and discrete (both ordered and unordered) exogenous variables. Using robust partial frontier techniques, the probabilistic and conditional characterization of the production process, as well as insights from the recent developments in nonparametric econometrics, we present a generalized approach for conditional efficiency measurement. To do so, we utilize a tailored mixed kernel function with a data-driven bandwidth selection. So far only descriptive analysis for studying the effect of heterogeneity in conditional efficiency estimation has been suggested. We show how to use and interpret nonparametric bootstrap-based significance tests in a generalized conditional efficiency framework. This allows us to study statistical significance of continuous and discrete exogenous variables on production process. The proposed approach is illustrated using simulated examples as well as a sample of British pupils from the OECD Pisa data set. The results of the empirical application show that several exogenous discrete factors have a statistically significant effect on the educational process.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14034.

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Date of creation: 04 Mar 2009
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Handle: RePEc:pra:mprapa:14034

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Keywords: Nonparametric estimation; Conditional efficiency measures; Exogenous factors; Generalized kernel function; Education;

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  21. Cazals Catherine & Dudley Paul & Florens Jean-Pierre & Patel Shital & Rodriguez Frank, 2008. "Delivery Offices Cost Frontier: A Robust Non Parametric Approach with Exogenous Variables," Review of Network Economics, De Gruyter, vol. 7(2), pages 1-15, June.
  22. Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.
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  26. Laurens Cherchye & Kristof De Witte & Erwin Ooghe, 2008. "Equity and efficiency in private and public education: a nonparametric comparison," Center for Economic Studies - Discussion papers ces0725, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  27. Cherchye, Laurens & De Witte, Kristof & Ooghe, Erwin & Nicaise, Ides, 2010. "Efficiency and equity in private and public education: A nonparametric comparison," European Journal of Operational Research, Elsevier, vol. 202(2), pages 563-573, April.
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Cited by:
  1. Kristof De Witte & Chris Van Klaveren, 2014. "How are teachers teaching? A nonparametric approach," Education Economics, Taylor & Francis Journals, vol. 22(1), pages 3-23, February.

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