ESTIMATING NON-CONCAVE METAFRONTIERS USING DATA ENVELOPE ANALYSIS

Abstract

In this article we propose non-concave metafrontiers for estimating the inefficiency among production functions which do not necessarily belong to the same technology. In this case, estimating a joint production by literature approaches might be inappropriate. We call this inefficiency technological inefficiency and suggest Data Envelopment Analysis to construct a metafrontier production function which consists only of parts of different (group) frontier production functions. Thus, in contrast to the common literature our metafrontier does not need any assumptions additional to the group production functions. We illustrate our approach by means of a large sample of differently diversified crop farms. Results show that the literature approach overestimates the technological inefficiency in our sample for 75% of the observations and on average up to 7%-points in a diversification class of farms.Efficiency analysis, Metafrontier production function, Data Envelopment Analysis, Production Economics,