A diagnostic test for the distribution-free efficiency estimator: An example using U.S. commercial bank data
✍ Scribed by Robert DeYoung
- Publisher
- Elsevier Science
- Year
- 1997
- Tongue
- English
- Weight
- 544 KB
- Volume
- 98
- Category
- Article
- ISSN
- 0377-2217
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✦ Synopsis
The distribution-free approach (DFA) to estimating X-efficiency assumes that individual firms exhibit constant inefficiency across time, and that inefficiency can be revealed by estimating a panel cost (or profit or production) function and averaging together the annual residuals for individual firms. However, the existing DFA literature may not pay enough attention to the consequences of including too many, or too few, time series observations in the data panel. This paper derives a test of whether additional annual data improves or worsens estimated X-efficiency, and demonstrates the test using a DFA cost efficiency model and U.S. commercial bank data from 1984 through 1994.