Stochastic efficiency measurement: The curse of theoretical consistency
The availability of efficiency estimation software – freely distributed via the internet and relatively easy to use – recently inflated the number of corresponding applications. The resulting efficiency estimates are used without a critical assessment with respect to the literature on theoretical consistency, flexibility and the choice of the appropriate functional form. The robustness of policy suggestions based on inferences from efficiency measures nevertheless crucially depends on theoretically well-founded estimates. This paper adresses stochastic efficiency measurement by critically reviewing the theoretical consistency of recently published technical efficiency estimates. The results confirm the need for a posteriori checking the regularity of the estimated frontier by the researcher and, if necessary, the a priori imposition of the theoretical requirements.
Volume (Year): IX (2006)
Issue (Month): (May)
|Contact details of provider:|| Postal: |
Phone: (5411) 6314-3000
Fax: (5411) 4314-1654
Web page: http://www.cema.edu.ar/publicaciones/jae.html
More information through EDIRC
References listed on IDEAS
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.:
- George Battese & Sumiter Broca, 1997. "Functional Forms of Stochastic Frontier Production Functions and Models for Technical Inefficiency Effects: A Comparative Study for Wheat Farmers in Pakistan," Journal of Productivity Analysis, Springer, vol. 8(4), pages 395-414, November.
- A. Ronald Gallant & Gene H. Golub, 1982.
"Imposing Curvature Restrictions on Flexible Functional Forms,"
538, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Gallant, A. Ronald & Golub, Gene H., 1984. "Imposing curvature restrictions on flexible functional forms," Journal of Econometrics, Elsevier, vol. 26(3), pages 295-321, December.
- Blackorby, Charles & Diewert, W E, 1979. "Expenditure Functions, Local Duality, and Second Order Approximations," Econometrica, Econometric Society, vol. 47(3), pages 579-601, May.
- Edward R. Morey, 1986. "An Introduction to Checking, Testing, and Imposing Curvature Properties: The True Function and the Estimated Function," Canadian Journal of Economics, Canadian Economics Association, vol. 19(2), pages 207-35, May.
- Terrell, Dek, 1996. "Incorporating Monotonicity and Concavity Conditions in Flexible Functional Forms," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(2), pages 179-94, March-Apr.
- Diewert, Walter E & Wales, Terence J, 1987.
"Flexible Functional Forms and Global Curvature Conditions,"
Econometric Society, vol. 55(1), pages 43-68, January.
- W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
- Bernhard Brümmer, 2001. "Estimating confidence intervals for technical efficiency: the case of private farms in slovenia," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 28(3), pages 285-306, October.
- David L. Ryan & Terence J. Wales, 1999. "Flexible And Semiflexible Consumer Demands With Quadratic Engel Curves," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 277-287, May.
- Barnett, William A & Kirova, Milka & Pasupathy, Meenakshi, 1995.
"Estimating Policy-Invariant Deep Parameters in the Financial Sector When Risk and Growth Matter,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 27(4), pages 1402-29, November.
- William A. Barnett & Milka Kirova & Meenakshi Pasupathy, 1994. "Estimating policy-invariant deep parameters in the financial sector when risk and growth matter," Proceedings, Federal Reserve Bank of Cleveland, pages 1402-1440.
- Diewert, W E, 1974. "Functional Forms for Revenue and Factor Requirements Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 119-30, February.
- Dimitris Christopoulos & John Loizides & Efthymios G. Tsionas, 2001. "Efficiency in European railways: Not as inefficient as one might think," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 63-88, May.
- Lau, Lawrence J., 1986. "Functional forms in econometric model building," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 26, pages 1515-1566 Elsevier.
- Johannes Sauer & Klaus Frohberg, 2007. "Allocative efficiency of rural water supply – a globally flexible SGM cost frontier," Journal of Productivity Analysis, Springer, vol. 27(1), pages 31-40, February.
- Ryan, David L & Wales, Terence J, 1998. "A Simple Method for Imposing Local Curvature in Some Flexible Consumer-Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 331-38, July.
- Bitros, G.C. & Tsionas, E.G., 2001.
"A Consistent Approach to Cost Efficiency Measurement,"
DEOS Working Papers
124, Athens University of Economics and Business.
- George C. Bitros & Efthymios G. Tsionas, 2004. "A Consistent Approach to Cost Efficiency Measurement," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(1), pages 49-69, 02.
- Bitros, G.C. & Tsionas, E.G., 2001. "A Consistent Approach to Cost Efficiency Measurement," Athens University of Economics and Business 124, Athens University of Economics and Business, Department of International and European Economic Studies.
- Bernhard Brümmer & Jens-Peter Loy, 2000. "The Technical Efficiency Impact of Farm Credit Programmes: A Case Study of Northern Germany," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(3), pages 405-418.
- Wales, Terence J., 1977. "On the flexibility of flexible functional forms : An empirical approach," Journal of Econometrics, Elsevier, vol. 5(2), pages 183-193, March.
- Barnett, William A., 2002. "Tastes and technology: curvature is not sufficient for regularity," Journal of Econometrics, Elsevier, vol. 108(1), pages 199-202, May.
- Kumbhakar, Subal C, 1989. "Estimation of Technical Efficiency Using Flexible Functional Form and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(2), pages 253-58, April.
- Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, vol. 6(3), pages 284-316, June.
- Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (I): The Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 1, number fuss1978.
- Alvarez, Antonio & Arias, Carlos, 2004. "Technical efficiency and farm size: a conditional analysis," Agricultural Economics, Blackwell, vol. 30(3), pages 241-250, May.
- Kwon, Oh Sang & Lee, Hyunok, 2004. "Productivity improvement in Korean rice farming: parametric and non-parametric analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), June.
- Pierani, Pierpaolo & Rizzi, Pier Luigi, 2003. "Technology and efficiency in a panel of Italian dairy farms: an SGM restricted cost function approach," Agricultural Economics, Blackwell, vol. 29(2), pages 195-209, October.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cem:jaecon:v:9:y:2006:n:1:p:139-166. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valeria Dowding)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.