Profit Efficiency Analysis Under Limited Information. With an Application to German Farm Types
AbstractLack of information about technology and prices often hampers the empirical assessment of the validity of the profit maximization hypothesis. We show that the non-parametric Data Envelopment Analysis (DEA) methodology comprises natural tools for dealing with such incomplete information. In particular, we focus on the economic meaning of the DEA model that builds on assumptions of monotone and convex production possibility sets, and provide some extensions that further exploit this economic interpretation. This perspective on DEA is all the more attractive since its original use for technical efficiency analysis is sometimes questionable given its restrictive production assumptions. An application to German farm types complements our methodological discussion. By using nonparametric tools to test specific hypotheses about profit differences, we further demonstrate the potential of the non-parametric approach in deriving strong and robust statistical evidence while imposing minimal structure on the setting under study.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics in its series Public Economics Working Paper Series with number ces0202.
Length: 28 pp.
Date of creation: 2002
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Other versions of this item:
- Cherchye, Laurens & Van Puyenbroeck, Tom, 2007. "Profit efficiency analysis under limited information with an application to German farm types," Omega, Elsevier, vol. 35(3), pages 335-349, June.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- P32 - Economic Systems - - Socialist Institutions and Their Transitions - - - Collectives; Communes; Agricultural Institutions
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
This paper has been announced in the following NEP Reports:
- NEP-AGR-2003-03-25 (Agricultural Economics)
- NEP-ALL-2003-01-27 (All new papers)
- NEP-EFF-2003-03-25 (Efficiency & Productivity)
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