A new approach for technical efficiency estimation in multiple output production

✍ Scribed by John Ruggiero

• Publisher: Elsevier Science
• Year: 1998
• Tongue: English
• Weight: 143 KB
• Volume: 111
• Category: Article
• ISSN: 0377-2217
• DOI: 10.1016/s0377-2217(97)00351-2

✦ Synopsis

The nonparametric technique of Data Envelopment Analysis (DEA) has been used to measure technical eciency. This approach has proven useful because, unlike regression analyses, it allows multiple outputs and does not require a priori functional form speci®cation. DEA does, however, require correct model speci®cation; inclusion of inappropriate variables or omission of relevant variables leads to distortions. The purpose of this paper is to develop an alternative methodology based on canonical correlation to measure technical eciency for multiple output production correspondences. Using simulated data, the new methodology is compared with DEA. The results indicate that the canonical regression approach outperforms DEA in most cases.