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A Bayesian Approach To Imposing Curvature On Distance Functions

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Author Info
Tim J. Coelli ()
Chris O’Donnell (CEPA - School of Economics, The University of Queensland)

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Abstract

The estimated parameters of output distance functions frequently violate the monotonicity, quasiconvexity and convexity constraints implied by economic theory, leading to estimated elasticities and shadow prices that are incorrectly signed, and ultimately to perverse conclusions concerning the effects of input and output changes on productivity growth and relative efficiency levels. We show how a Bayesian approach can be used to impose these constraints on the parameters of a translog output distance function. Implementing the approach involves the use of a Gibbs sampler with data augmentation. A Metropolis-Hastings algorithm is also used within the Gibbs to simulate observations from truncated pdfs. Our methods are developed for the case where panel data is available and technical inefficiency effects are assumed to be time-invariant. Two models – a fixed effects model and a random effects model – are developed and applied to panel data on 17 European railways. We observe significant changes in estimated elasticities and shadow price ratios when regularity restrictions are imposed

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Paper provided by School of Economics, University of Queensland, Australia in its series CEPA Working Papers Series with number WP032003.

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Date of creation: Aug 2003
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Handle: RePEc:qld:uqcepa:03

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Griffiths, William E. & O'Donnell, Christopher J. & Cruz, Augustina Tan, 1999. "Imposing Regularity Conditions On A System Of Cost And Factor Share Equations," Working Papers 12925, University of New England, School of Economics. [Downloadable!]
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  5. John R. Swinton, 1998. "At What Cost do We Reduce Pollution? Shadow Prices of SO2 Emissions," The Energy Journal, International Association for Energy Economics, vol. 19(4), pages 63-84.
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  11. Gary Koop & M. F. J. Steel, 2004. "Bayesian Analysis of Stochastic Frontier Models," ESE Discussion Papers 19, Edinburgh School of Economics, University of Edinburgh.
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  14. Ryan, David L. & Wales, Terence J., 2000. "Imposing local concavity in the translog and generalized Leontief cost functions," Economics Letters, Elsevier, vol. 67(3), pages 253-260, June. [Downloadable!] (restricted)
  15. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June. [Downloadable!] (restricted)
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  19. Tim Coelli & Sergio Perelman, 2000. "Efficiency measurement, multiple-output technologiess and distance functions : with application to European Railways," CREPP Working Papers 9605, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège. [Downloadable!]
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  1. Lissitsa, Alexej & Rungsuriyawiboon, Supawat, 2006. "Agricultural Productivity Growth in the European Union and Transition Countries," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25353, International Association of Agricultural Economists. [Downloadable!]
  2. Chris (Hristos) Doucouliagos & Malcolm Abbott, 2007. "Competition and Efficiency: Overseas students and technical efficiency in Australian and New Zealand Universities," Economics Series 2007_09, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
    Other versions:
  3. Sergio Perlman & Daniel Santin, 2005. "On the generation of a regular multi-input multi-output technology using parametric output distance functions," CREPP Working Papers 0507, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège. [Downloadable!]
  4. Kelvin_Balcombe & Dirk_Bezemer & Junior_Davis & Iain_Fraser, 2005. "Livelihoods and Farm Efficiency in Rural Georgia," Development and Comp Systems 0502005, EconWPA. [Downloadable!]
  5. Supawat Rungsuriyawiboon & Chris O’Donnell, 2004. "Curvature-Constrained Estimates of Technical Efficiency and Returns to Scale for U.S. Electric Utilities," CEPA Working Papers Series WP072004, School of Economics, University of Queensland, Australia. [Downloadable!]
  6. David Tomberlin & Garth Holloway, 2007. "Trip-Level Analysis of Efficiency Changes in Oregon’s Deepwater Trawl Fishery," Working Papers 2007.86, Fondazione Eni Enrico Mattei. [Downloadable!]
  7. Gholamreza Hajargasht & Tim Coelli & D. S. Prasada Rao, 2006. "A Dual Measure of Economies of Scope," CEPA Working Papers Series WP032006, School of Economics, University of Queensland, Australia. [Downloadable!]
    Other versions:
  8. Dirk Bezemer & Kelvin Balcombe & Junior Davis & Iain Fraser, 2005. "Livelihoods and farm efficiency in rural Georgia," Applied Economics, Taylor and Francis Journals, vol. 37(15), pages 1737-1745, August. [Downloadable!] (restricted)
  9. Wolff, Hendrik & Heckelei, Thomas & Mittelhammer, Ron C., 2004. "Imposing Monotonicity And Curvature On Flexible Functional Forms," 2004 Annual meeting, August 1-4, Denver, CO 20256, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  10. Cullmann, Astrid & Farsi, Mehdi & Filippini Massimo, 2009. "Unobserved Heterogeneity and International Benchmarking in Public Trasport," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 0904, Biblioteca universitaria di Lugano (University Library of Lugano). [Downloadable!]
  11. Kelvin Balcombe & Iain Fraser & Jae H. Kim, 2006. "Estimating technical efficiency of Australian dairy farms using alternative frontier methodologies," Applied Economics, Taylor and Francis Journals, vol. 38(19), pages 2221-2236, October. [Downloadable!] (restricted)
  12. Sauer, Johannes, 2006. "Monotonicity And Curvature - A Bootstrapping Approach," 46th Annual Conference, Giessen, Germany, October 4-6, 2006 14948, German Association of Agricultural Economists (GEWISOLA). [Downloadable!]
  13. Fraser, Iain & Davis, Junior & Balcombe, Kelvin & Bezemer, Dirk, 2005. "Is Rural Income Diversity Pro-Growth? Is It Pro-Poor? Evidence from Georgia," Proceedings of the German Development Economics Conference, Kiel 2005 4, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  14. Rungsuriyawiboon, Supawat & Lissitsa, Alexej, 2006. "Agricultural Productivity Growth In The European Union And Transition Countries," IAMO Discussion Papers 14903, Institute of Agricultural Development in Central and Eastern Europe (IAMO). [Downloadable!]
  15. Sergio Perlman & Daniel Santin, 2005. "Measuring educational efficiency at student level with parametric stochastic distance functions: An application to Spanish PISA results," CREPP Working Papers 0504, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège. [Downloadable!]
  16. Sauer, Johannes, 2008. "Quota Deregulation and Organic versus Conventional Milk – A Bayesian Distance Function Approach," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6425, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
    Other versions:
  17. Kevin Balcombe & Hristos Doucouliagos & Iain Fraseer, 2006. "Input Usage, Ouput Mix and Industry Deregulation: An Analysis of the Australian Dairy Manufacturing Industry," Economics Series 2006_27, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
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