A statistical framework for estimating output-specific efficiencies

Publication: Working/Discussion PaperWU Working Paper

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Abstract

This paper presents a statistical framework for estimating output-specific efficiencies for the 2-output case based upon a DEA frontier estimate. The key to the approach is the concept of target output-mix. Being usually unobserved, target output-mixes of firms are modelled as missing data. Using this concept the relevant data generating process can be formulated. The resulting likelihood function is analytically intractable, so a data augmented Bayesian approach is proposed for estimation purposes. This technique is adapted to the present purpose. Some implementation issues are discussed leading to an empirical Bayes setup with data informed priors. A prove of scale invariance is provided. (author's abstract)

Publication series

SeriesDepartment of Economics Working Paper Series
Number83

WU Working Paper Series

  • Department of Economics Working Paper Series

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