The StoNED age: The departure into a new era of efficiency analysis? An MC study comparing StoNED and the "oldies" (SFA and DEA)
AbstractBased on the seminal paper of Farrell (1957), researchers have developed several methods for measuring efficiency. Nowadays, the most prominent representatives are nonparametric data envelopment analysis (DEA) and parametric stochastic frontier analysis (SFA), both introduced in the late 1970s. Since decades, researchers have been attempting to develop a method which combines the virtues - both nonparametric and stochastic - of these oldies. The recently introduced Stochastic non-smooth envelopment of data (StoNED) by Kuosmanen and Kortelainen (2010) is a promising method. This paper compares the StoNED method with the two oldies DEA and SFA and extends the initial Monte Carlo simulation of Kuosmanen and Kortelainen (2010) in two directions. Firstly, we consider a wider range of conditions. Secondly, we also consider the maximum likelihood estimator (ML) and the pseudolikelihood estimator (PL) for SFA and StoNED, respectively. We show that, in scenarios without noise, the rivalry is still between the oldies, while in noisy scenarios, the nonparametric StoNED PL now constitutes a promising alternative to the SFA ML. --
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Bibliographic InfoPaper provided by Center of Applied Economic Research Münster (CAWM), University of Münster in its series CAWM Discussion Papers with number 60.
Date of creation: 2012
Date of revision:
efficiency; stochastic non-smooth envelopment of data (StoNED); data envelopment analysis (DEA); stochastic frontier analysis (SFA); monte carlo simulation;
Find related papers by JEL classification:
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- D2 - Microeconomics - - Production and Organizations
- L5 - Industrial Organization - - Regulation and Industrial Policy
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
- NEP-CMP-2012-09-09 (Computational Economics)
- NEP-ECM-2012-09-09 (Econometrics)
- NEP-EFF-2012-09-09 (Efficiency & Productivity)
- NEP-ORE-2012-09-09 (Operations Research)
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