Benchmarking and incentive regulation of quality of service: an application to the UK electricity distribution utilities

Quality of service has emerged as an important issue in post-reform regulation of electricity distribution networks. Regulators have employed partial incentive schemes to promote cost saving, investment efficiency, and service quality. This paper presents a quality-incorporated benchmarking study of the electricity distribution utilities in the UK between 1991/92 and 1998/99. We calculate technical efficiency of the utilities using Data Envelopment Analysis technique and productivity change over time using quality-incorporated Malmquist indices. We find that cost efficient firms do not necessarily exhibit high service quality and that efficiency scores of cost-only models do not show high correlation with those of quality-based models. The results also show that improvements in service quality have made a significant contribution to the sector�s total productivity change. In addition, we show that integrating quality of service in regulatory benchmarking is preferable to cost-only approaches

Technical and Scale Efficiencies for Chinese Rural Credit Cooperatives: A Bootstrapping Approach in Data Envelopment Analysis

Chinese rural credit cooperatives (RCCs) are a major supplier of credit to the rural sector in the country. However, Chinese RCCs are currently encountering operating problems, and an experimental reform is being carried out to restructure and reform the RCCs. In order to have some idea about the efficacy of reform, it is important to have an understanding of the institutional economics underlying the delivery of rural credit in China. This paper evaluates pure technical efficiency, overall technical efficiency, and scale efficiencies for RCCs in China using nonparametric techniques. The use of a bootstrap algorithm is proposed to perform inference for efficiency measures. Keywords: bootstrapping, Chinese rural credit cooperatives, data envelopment analysis, scale efficiency, technical efficiency.

Sensitivity analysis of network DEA illustrated in branch banking

Users of data envelopment analysis (DEA) often presume efficiency estimates to be robust. While traditional DEA has been exposed to various sensitivity studies, network DEA (NDEA) has so far escaped similar scrutiny. Thus, there is a need to investigate the sensitivity of NDEA, further compounded by the recent attention it has been receiving in literature. NDEA captures the underlying performance information found in a firm?s interacting divisions or sub-processes that would otherwise remain unknown. Furthermore, network efficiency estimates that account for divisional interactions are more representative of a dynamic business. Following various data perturbations overall findings indicate positive and significant rank correlations when new results are compared against baseline results - suggesting resilience. Key findings show that, (a) as in traditional DEA, greater sample size brings greater discrimination, (b) removing a relevant input improves discrimination, (c) introducing an extraneous input leads to a moderate loss of discrimination, (d) simultaneously adjusting data in opposite directions for inefficient versus efficient branches shows a mostly stable NDEA, (e) swapping divisional weights produces a substantial drop in discrimination, (f) stacking perturbations has the greatest impact on efficiency estimates with substantial loss of discrimination, and (g) layering suggests that the core inefficient cohort is resilient against omission of benchmark branches. Various managerial implications that follow from empirical findings are discussed in conclusions.

Benchmarking and incentive regulation of quality of service: an application to the UK electricity distribution utilities

Quality of service has emerged as an important issue in post-reform regulation of electricity distribution networks. Regulators have employed partial incentive schemes to promote cost saving, investment efficiency, and service quality. This paper presents a quality-incorporated benchmarking study of the electricity distribution utilities in the UK between 1991/92 and 1998/99. We calculate technical efficiency of the utilities using Data Envelopment Analysis technique and productivity change over time using quality-incorporated Malmquist indices. We find that cost efficient firms do not necessarily exhibit high service quality and that efficiency scores of cost-only models do not show high correlation with those of quality-based models. The results also show that improvements in service quality have made a significant contribution to the sector’s total productivity change. In addition, we show that integrating quality of service in regulatory benchmarking is preferable to cost-only approaches.quality of service, benchmarking, incentive regulation, data envelopment analysis, electricity

Lowland farming system inefficiency in Benin (West Africa):

This paper uses a directional distance function and a single truncated bootstrap approach to investigate inefficiency of lowland farming systems in the Benin Republic. First, we employed a dual approach to estimate and decompose short-run profit inefficiency of each farming system into pure technical, allocative and scale inefficiency and also into input and output inefficiency. Second, an econometric analysis of factors affecting the inefficiency was generated using a single truncated bootstrap procedure to improve inefficiency analysis statistically and obtain consistent estimates. In the short run, scale, allocative and output inefficiency were found to be the main sources of inefficiency. Based on inefficiency results, the inefficiency of lowland farming systems is the most diverse. Compared to a vegetable farming system, technical inefficiency is significantly higher if farmers switch to a rice farming system. Scale, allocative, output, and input inefficiency are significantly lower with an integrated ricevegetable farming system and there was high prevalence of increasing returns to scale in the integrated rice-vegetable farming system. Water control and lowland farming systems are complements and play a significant role in the level of inefficiency. Input inefficiency shows the difficulty that the producers face in adjusting the quality and quantity of seeds and fertilizers. The paper provides empirical support for efforts to promote an integrated rice-vegetable farming system in West Africa lowlands to increase food security. Keywords Lowlands . Inefficiency . Bootstrap . Beni

The competitiveness of nations and implications for human development

This is the post-print version of the final paper published in Socio-Economic Planning Sciences. The published article is available from the link below. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. Copyright @ 2010 Elsevier B.V.Human development should be the ultimate objective of human activity, its aim being healthier, longer, and fuller lives. Thus, if the competitiveness of a nation is properly managed, enhanced human welfare should be the key expected consequence. The research described here explores the relationship between the competitiveness of a nation and its implications for human development. For this purpose, 45 countries were evaluated initially using data envelopment analysis. In this stage, global competitiveness indicators were taken as input variables with human development index indicators as output variables. Subsequently, an artificial neural network analysis was conducted to identify those factors having the greatest impact on efficiency scores

Transit Costs and Cost Efficiency: Bootstrapping Nonparametric Frontiers.

This paper explores a selection of recently proposed bootstrapping techniques to estimate non-parametric convex (DEA) cost frontiers and efficiency scores for transit firms. Using a sample of Norwegian bus operators, the key results can be summarised as follows: (i) the bias implied by uncorrected cost efficiency measures is numerically important (close to 25%), (ii) the bootstrapped-based test rejects the constant returns to scale hypothesis (iii) explaining patterns of efficiency scores using a two-stage bootstrapping approach detects only one significant covariate, in contrast to earlier results highlighting, e.g., the positive impact of high-powered contract types. Finally, comparing the average inefficiency obtained for the Norwegian data set with an analogous estimate for a smaller French sample illustrates how the estimated differences in average efficiency almost disappear once sample size differences are accounted for.

Regulation and efficiency incentives: evidence from the England and Wales water and sewerage industry

This paper evaluates the impact of the tightening in price cap by OFWAT and of other operational factors on the efficiency of water and sewerage companies in England and Wales using a mixture of data envelopment analysis and stochastic frontier analysis. Previous empirical results suggest that the regulatory system introduced at privatization was lax. The 1999 price review signaled a tightening in regulation which is shown to have led to a significant reduction in technical inefficiency. The new economic environment set by price-cap regulation acted to bring inputs closer to their cost-minimizing levels from both a technical and allocative perspective

Production Efficiency versus Ownership: The Case of China

In this study, we explore the pattern of efficiency among enterprises in China‘s 29 provinces across different ownership types in heavy and light industries and across different regions (coastal, central and western). We do so by performing a bootstrap-based analysis of group efficiencies (weighted and non-weighted), estimating and comparing densities of efficiency distributions, and conducting a bootstrapped truncated regression analysis. We find evidence of interesting differences in efficiency levels among various ownership groups, especially for foreign and local ownership, which have different patterns for light and heavy industries.efficiency, data envelopment analysis, bootstrapping, ownership, China

Production Efficiency versus Ownership: The Case of China

In this study, we explore the pattern of efficiency among enterprises in China’s 29 provinces across different ownership types in heavy and light industries and across different regions (coastal, central and western). We do so by performing a bootstrap-based analysis of group efficiencies (weighted and non-weighted), estimating and comparing densities of efficiency distributions, and conducting a bootstrapped truncated regression analysis. We find evidence of interesting differences in efficiency levels among various ownership groups, especially for foreign and local ownership, which have different patterns for light and heavy industries.Efficiency; Data envelopment analysis; Bootstrapping; Ownership; China