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On the Consistency of the DEA-based Average Technical Efficiency Bootstrap

Author

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  • Löthgren, Mickael

    () (Dept. of Economic Statistics, Stockholm School of Economics)

Abstract

This paper shows that the bootstrap algorithm for average technical efficiency by Atkinson and Wilson (1995) should be applied with great care for the Data Envelopment Analysis (DEA) estimator if the production frontier is stochastic. A stochastic frontier implies that the DEA estimator is inconsistent, which in turn leads to inconsistent and potentially highly misleading bootstrap confidence intervals. A Monte Carlo simulation study reveals that the bootstrap confidence interval coverage accuracy goes to zero as the sample size increases, even for small contributions of frontier variance to total frontier and efficiency variance.

Suggested Citation

  • Löthgren, Mickael, 1997. "On the Consistency of the DEA-based Average Technical Efficiency Bootstrap," SSE/EFI Working Paper Series in Economics and Finance 179, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0179
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    References listed on IDEAS

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    More about this item

    Keywords

    Bootstrap confidence intervals; Consistency; Data Envelopment Analysis; Distance function; Monte Carlo simulation; Stochastic frontier;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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