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Simar and Wilson two-stage efficiency analysis for Stata

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Listed:
  • Oleg Badunenko

    (University of Portsmouth)

  • Harald Tauchmann

    (Friedrich-Alexander-Universität Erlangen-Nürnberg)

Abstract

When one analyzes the determinants of production efficiency, regressing efficiency scores estimated by data envelopment analysis on explanatory variables has much intuitive appeal. Simar and Wilson (2007, Journal of Econometrics 136: 31–64) show that this conventional two-stage estimation procedure suffers from severe flaws that render its results, and particularly statistical inference based on them, questionable. They additionally propose a statistically grounded bootstrap- based two-stage estimator that eliminates the above-mentioned weaknesses of its conventional predecessors and comes in two variants. In this article, we introduce the new command simarwilson, which implements either variant of the suggested estimator in Stata. The command allows for various options and extends the orig- inal procedure in some respects. For instance, it allows for analyzing both output- and input-oriented efficiency. To demonstrate the capabilities of simarwilson, we use data from the Penn World Tables and the Global Competitiveness Report by the World Economic Forum to perform a cross-country empirical study about the importance of quality of governance in a country for its efficiency of output production.

Suggested Citation

  • Oleg Badunenko & Harald Tauchmann, 2019. "Simar and Wilson two-stage efficiency analysis for Stata," Stata Journal, StataCorp LP, vol. 19(4), pages 950-988, December.
    • Handle: RePEc:tsj:stataj:v:19:y:2019:i:4:p:950-988
    DOI: 10.1177/1536867X19893640
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