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Article
Alternative Technical Efficiency Measures: Skew, Bias, and Scale
Center for Policy Research
  • William Clinton Horrace, Syracuse University. Center for Policy Research
  • Qu Feng, Nanyang Technological University, Division of Economics.
Description/Abstract

In the fixed-effects stochastic frontier model an efficiency measure relative to the best firm in the sample is universally employed. This paper considers a new measure relative to the worst firm in the sample. We find that estimates of this measure have smaller bias than those of the traditional measure when the sample consists of many firms near the efficient frontier. Moreover, a two-sided measure relative to both the best and the worst firms is proposed. Simulations suggest that the new measures may be preferred depending on the skewness of the inefficiency distribution and the scale of efficiency differences.

Document Type
Working Paper
Date
1-1-2010
Keywords
  • Stochastic frontier model,
  • relative efficiency measure,
  • two-sided measure,
  • bias,
  • bootstrap confidence intervals
Language
English
Series
Working Papers Series
Disciplines
Additional Information

Working paper no. 121

Harvest from RePEc at http://repec.org

Source
Metadata from RePEc
Creative Commons License
Creative Commons Attribution 3.0
Citation Information
William Clinton Horrace and Qu Feng. "Alternative Technical Efficiency Measures: Skew, Bias, and Scale" (2010)
Available at: http://works.bepress.com/horrace/2/