Estimation of semiparametric stochastic frontiers under shape constraints with application to pollution generating technologies

A number of studies have explored the semi- and nonparametric estimation of stochastic frontier models by using kernel regression or other nonparametric smoothing techniques. In contrast to popular deterministic nonparametric estimators, these approaches do not allow one to impose any shape constraints (or regularity conditions) on the frontier function. On the other hand, as many of the previous techniques are based on the nonparametric estimation of the frontier function, the convergence rate of frontier estimators can be sensitive to the number of inputs, which is generally known as “the curse of dimensionality” problem. This paper proposes a new semiparametric approach for stochastic frontier estimation that avoids the curse of dimensionality and allows one to impose shape constraints on the frontier function. Our approach is based on the singleindex model and applies both single-index estimation techniques and shape-constrained nonparametric least squares. In addition to production frontier and technical efficiency estimation, we show how the technique can be used to estimate pollution generating technologies. The new approach is illustrated by an empirical application to the environmental adjusted performance evaluation of U.S. coal-fired electric power plants.stochastic frontier analysis (SFA), nonparametric least squares, single-index model, sliced inverse regression, monotone rank correlation estimator, environmental efficiency

Measuring productivity differentials – An application to milk production in Nordic countries

The aim of this paper is to analyse the regional productivity differentials on dairy farms in Denmark, Finland and Sweden. Several methods have been suggested for analysing productivity differentials in agriculture between groups of farms or countries. Hayami [5] and Hayami and Ruttan [7] suggested the meta-production function approach. This idea has been further developed by Lau and Yotopoulos [9] and Fulginity and Perrin [13]. Battese and Rao [2] suggested the meta-frontier analysis for these comparisons. One of the advantages of meta-frontiers with respect to metaproduction functions is that they are able to separate technological differences from the differences in technical efficiency. Battese et al. [5] and O’Donnell et al. [16] have extended this idea and developed both parametric and nonparametric approaches. In this paper, we extend the metafrontier analysis to the concave nonparametric least squares estimation of the production function suggested by Kuosmanen [18,19]. In addition, we compare the results with the approach where the estimation of meta-frontier can be avoided. The reference can also be the maximum output providing technology that is the one that yields the maximum estimated output, given inputs [21]. In this case the estimation can be based either on average or frontier production functions. The farm level data is obtained from the EU’s Farm Accountancy Data Network data set for Denmark, Finland and Sweden. They cover 954 dairy farms in 2003. The results suggest that different method provide slightly different results but in all approaches productivity differentials are considerable in favour of Danish farms. In addition, the Danish technology is not only dominating at the mean but also at most of the data points.productivity, technical efficiency, meta-frontier, Productivity Analysis,

The Optimal Size of German Cities An Efficiency Analysis Perspective

This work investigates the interrelation between production efficiency and population size of German cities. The productive efficiency in this context is the scale efficiency, which is a result of positive and negative agglomeration externalities. The investigation is performed in a two-stage process. First, the efficiency in terms of scale efficiency is measured using nonparametric methods. The second stage investigates the relation of scale efficiency and populations size. It turns out that the optimal city size in Germany is about 220,000 inhabitants, which is almost the mean size of all German cities involved. Although there are regional differences, optimal city size remains stable as the mean size.Efficiency analysis, optimal city size, population size, German cities

Role of benchmark technology in sustainable value analysis : an application to Finnish dairy farms

Sustainability is a multidimensional concept that entails economic, environmental, and social aspects. The sustainable value (SV) method is one of the most promising attempts to quantify sustainability performance of firms. SV compares performance of a firm to a benchmark, which must be estimated in one way or another. This paper examines alternative parametric and nonparametric methods for estimating the benchmark technology from empirical data. Reviewed methods are applied to an empirical data of 332 Finnish dairy farms. The application reveals four interesting conclusions. First, the greater flexibility of the nonparametric methods is evident from the better empirical fit. Second, negative skewness of the regression residuals of both parametric OLS and nonparametric CNLS speaks against the average-practice benchmark technology in this application. Third, high positive correlations across a wide spectrum of methods suggest that the findings are relatively robust. Forth, the stochastic decomposition of the disturbance term to filter out the noise component from the inefficiency term yields more realistic efficiency estimates and performance targets

AN EMPIRICAL SURVEY OF FRONTIER EFFICIENCY MEASUREMENT TECHNIQUES IN HEALTHCARE SERVICES

Healthcare institutions worldwide are increasingly the subject of analyses aimed at defining, measuring and improving organisational efficiency. However, despite the importance of efficiency measurement in healthcare services, it is only relatively recently that the more advanced econometric and mathematical frontier techniques have been applied to hospitals, nursing homes, health management organisations and physician practices. This paper attempts to provide a synoptic survey of the comparatively few empirical analyses of frontier efficiency measurement in healthcare services. Both the measurement of inefficiency in healthcare services and the determinants of healthcare efficiency are examined.data envelopment analysis; stochastic frontiers; technical, allocative and productive efficiency