Input, Output and Graph Technical Efficiency Measures on Non-Convex FDH Models with Various Scaling Laws: An Integrated Approach Based upon Implicit Enumeration Algorithms

In a recent article, Briec, Kerstens and Vanden Eeckaut (2004) develop a series of nonparametric, deterministic non-convex technologies integrating traditional returns to scale assumptions into the non-convex FDH model. They show, among other things, how the traditional technical input efficiency measure can be analytically derived for these technology specifications. In this paper, we develop a similar approach to calculate output and graph measures of technical efficiency and indicate the general advantage of such solution strategy via enumeration. Furthermore, several analytical formulas are established and some algorithms are proposed relating the three measurement orientations to one another.Data Envelopment Analysis, Free Disposal Hull, technical efficiency

Measuring efficiency with neural networks. An application to the public sector

In this note we propose the artificial neural networks for measuring efficiency as a complementary tool to the common techniques of the efficiency literature. In the application to the public sector we find that the neural network allows to conclude more robust results to rank decision-making units.DEA

A General Framework to Evaluate Economic Efficiency with an Application to British SME

This article formalises the idea of money-metric production frontiers, which we propose as a general framework for nonparametric evaluation of economic efficiency. As we show in our methodological discussion, this improves the flexibility and economic interpretation of our model. The empirical part is the first attempt to test the existence of a size-efficiency relationship among small businesses in the United Kingdom. It is based on a unique panel both with respect to size — ranging from agriculture to services — and to the ten year time span. We employ statistically robust methods to estimate and analyse sectoral efficiency. Our analysis yields three main insights: (1) Average sectors are expected to be two to four times less efficient than those on the efficient frontier. Great dispersion of efficiency scores highlights the importance of dynamic out-of-equilibrium modelling. (2) There is no evidence of a general economy-wide size-efficiency relationship. (3) Economic efficiency remained constant over the past ten years.Small and medium enterprises; economic efficiency; firm size; robust efficiency estimation

Estimating the Potential Gains from Mergers: The Danish Agricultural Extension Services

We introduce simple non-parametric models to estimate the potential gains from merging production units. Three effects are distinguished. A merger may affect technical efficiency. It also affects the size of the operation which may or may not be advantageous depending on the return to scale properties of the underlying technologies. Lastly, it affects the mix of inputs available and the mix of outputs demanded. A merged unit face more "balanced" or "harmonic" input and output profiles which is typically advantageous. We use the model to estimate the potential gains from merging agricultural extension offices in Denmark.Teaching/Communication/Extension/Profession,

Converting to organic farming in France: Is there a selection problem?

Using a sample of French crop farms during the 1999-2006 period, we test whether less technically efficient farmers are more likely to engage in organic farming in order to benefit from conversion subsidies. Despite some limitations in our data, we find no evidence of such selection effect. On the contrary, our estimation results indicate that more technically efficient farmers are more likely to convert to organic farming. This finding is found to be robust to the method of calculation of efficiency scores, either parametric or non-parametric. This study also confirms that farm’s characteristics (education, farm size and legal status) and farmers’ practices under conventional farming do impact the probability of conversion to OF.Organic farming, technical efficiency, subsidies, selection, France, Agricultural and Food Policy, Crop Production/Industries, Farm Management, Land Economics/Use,

Nonparametric frontier estimation from noisy data

A new nonparametric estimator of production frontiers is defined and studied when the data set of production units is contaminated by measurement error. The measurement error is assumed to be an additive normal random variable on the input variable, but its variance is unknown. The estimator is a modification of the m-frontier, which necessitates the computation of a consistent estimator of the conditional survival function of the input variable given the output variable. In this paper, the identification and the consistency of a new estimator of the survival function is proved in the presence of additive noise with unknown variance. The performance of the estimator is also studied through simulated data.production frontier, deconvolution, measurement error, efficiency analysis

Technology and Firm Size Distribution:Evidence from Italian Manufacturing

This paper explores the relationship between firm size distribution and technology. Similarly to Crosato and Ganugi (2006), we focus on six industries from the Micro1 survey by the Italian Statistical National Office (ISTAT). Firm technology is analysed across selected industries by means of a non-parametric production analysis, the Free Disposal Hull approach (Deprins et al., 1984; Kerstens and Vanden Eeckaut, 1999). The existence of a link between technical efficiency and size on the one hand, and between scale elasticity and size on the other is investigated. Graphical analyses show the absence of a clear-cut relation in the first case, while an inverse relation is found in the second one. Building on this relation, we inquire whether the shape of the firm size-distribution is related to a particular pattern of returns to scale. This problem is studied through the Zipf Plot (Stanley et al., 1995) of the Pareto IV distribution, which is concave for firms up to a given threshold, and then becomes linear. Results show that firms in the concave part of the plot experience increasing returns to scale. On the contrary, firms in the linear part are mainly characterised by constant returns to scale.Italian manufacturing; Free Disposal Hull; Pareto distributions; Returns to scale;

Efficiency of public spending in developing countries : an efficiency frontier approach

Government spending in developing countries typically account for between15 and 30 percent of GDP. Hence, small changes in the efficiency of public spending could have a major impact on GDP and on the attainment of the government's objectives. The first challenge that stakeholders face is measuring efficiency. This paper attempts such quantification and has two major parts. The first part estimates efficiency as the distance between observed input-output combinations and an efficiency frontier (defined as the maximum attainable output for a given level of inputs). This frontier is estimated for several health and education output indicators by means of the Free Disposable Hull (FDH) and Data Envelopment Analysis (DEA) techniques. Both input-inefficiency (excess input consumption to achieve a level of output) and output-inefficiency (output shortfall for a given level of inputs) are scored in a sample of 140 countries using data from 1996 to 2002. The second part of the paper seeks to verify empirical regularities of the cross-country variation in efficiency. Results show that countries with higher expenditure levels register lower efficiency scores, as well as countries where the wage bill is a larger share of the government's budget. Similarly, countries with higher ratios of public to private financing of the service provision score lower efficiency, as do countries plagued by the HIV/AIDS epidemic and those with higher income inequality. Countries with higher aid-dependency ratios also tend to score lower in efficiency, probably due to the volatility of this type of funding that impedes medium term planning and budgeting. Though no causality may be inferred from this exercise, it points at different factors to understand why some countries might need more resources than others to achieve similar educational and health outcomes.Environmental Economics&Policies,Health Monitoring&Evaluation,Economic Theory&Research,Pharmaceuticals&Pharmacoeconomics,Financial Crisis Management&Restructuring

Estimating the Potential Gains from Mergers

We introduce simple production economic models to estimate the potential gains from mergers. We decompose the gains into technical efficiency, size (scale) and harmony (mix) gains, and we discuss alternative ways to capture these gains. We propose to approximate the production processes using the non-parametric Data Envelopment Analysis (DEA) approach, and we use the resulting operational approach to estimate the potential gains from merging agricultural extension offices in Denmark. Contents: 1. Introduction, 2. Literature, 3. Production Models, 4. Measures of Merger Gains, 5. Decomposing Merger Gains, 6. Alternative Decompositions, 7. The Danish Agricultural Extension Services, 8. Final Remarks, References. Key Words: Data Envelopment Analysis, management, organization, mergersData Envelopment Analysis, management, organization, mergers, Teaching/Communication/Extension/Profession,