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Is Efficiency Analysis All There Is With Data Envelopment Analysis

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  • Parman, Bryon
  • Featherstone, Allen
  • Coffey, Brian

Abstract

Nonparametric cost frontier estimation has been commonly used to examine the relative efficiency of firms without critically examining the shape of the cost frontier. To examine the shape of the cost frontier has required additional estimation using parametric methods to recover potential cost savings from multi-product and product-specific economies of scale. This paper develops and tests a method for estimating multi-product and product-specific economies of scale using the nonparametric approach by evaluating the difference between scale calculations from an assumed cost frontier and those estimated using data envelopment analysis. The results demonstrated that the nonparametric approach is able to accurately estimate multi-product economies of scale and product-specific economies of scale under alternative inefficiency distributional assumptions.

Suggested Citation

  • Parman, Bryon & Featherstone, Allen & Coffey, Brian, 2015. "Is Efficiency Analysis All There Is With Data Envelopment Analysis," Working Papers 197532, Mississippi State University, Department of Agricultural Economics.
    • Handle: RePEc:ags:misswp:197532
    DOI: 10.22004/ag.econ.197532
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    References listed on IDEAS

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    Keywords

    Agribusiness; Crop Production/Industries; Farm Management; Production Economics; Productivity Analysis; Research Methods/ Statistical Methods;
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