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Central Limit Theorems for Aggregate Efficiency

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  • Simar, Leopold
  • Zelenyuk, Valentin

Abstract

Applied researchers in the field of efficiency and productivity analysis often need to estimate and make inference about aggregate efficiency, such as industry efficiency or aggregate efficiency of a group of distinct firms within an industry (e.g., public versus private firms, regulated versus unregulated firms, etc.). While there are approaches to obtain point estimates for such important measures, no asymptotic theory has been derived for it. This is the gap in the literature we fill with this paper. Specifically, we develop full asymptotic theory for aggregate efficiency measures when the individual true efficiency scores being aggregated are observed as well as when they are unobserved and estimated via the data envelopment analysis or the free disposal hull. As a result, the developed theory opens a path for more accurate and theoretically better grounded statistical inference (e.g., estimation of confidence intervals and conducting statistical tests) on aggregate efficiency estimates such as industry efficiency, etc.
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Suggested Citation

  • Simar, Leopold & Zelenyuk, Valentin, 2018. "Central Limit Theorems for Aggregate Efficiency," LIDAM Reprints ISBA 2018010, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvar:2018010
    Note: In : Operations Research, vol. 66, no. 1, p. 137-149 (2018)
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    References listed on IDEAS

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    1. William W. Cooper & Lawrence M. Seiford & Joe Zhu (ed.), 2011. "Handbook on Data Envelopment Analysis," International Series in Operations Research and Management Science, Springer, number 978-1-4419-6151-8, December.
    2. Mayer, Andreas & Zelenyuk, Valentin, 2014. "Aggregation of Malmquist productivity indexes allowing for reallocation of resources," European Journal of Operational Research, Elsevier, vol. 238(3), pages 774-785.
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    4. Alois Kneip & Léopold Simar & Paul W. Wilson, 2016. "Testing Hypotheses in Nonparametric Models of Production," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 34(3), pages 435-456, July.
    5. Léopold Simar & Valentin Zelenyuk, 2011. "Stochastic FDH/DEA estimators for frontier analysis," Journal of Productivity Analysis, Springer, vol. 36(1), pages 1-20, August.
    6. Zelenyuk, Valentin, 2015. "Aggregation of scale efficiency," European Journal of Operational Research, Elsevier, vol. 240(1), pages 269-277.
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    14. Wade D. Cook & Julie Harrison & Raha Imanirad & Paul Rouse & Joe Zhu, 2013. "Data Envelopment Analysis with Nonhomogeneous DMUs," Operations Research, INFORMS, vol. 61(3), pages 666-676, June.
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