Testing for Productive Efficiency with Errors-in-Variables: With an Application to the Dutch Electricity Sesctor

21 Pages Posted: 10 Feb 2003

See all articles by Timo Kuosmanen

Timo Kuosmanen

Aalto University School of Business

Thierry Post

Graduate School of Business of Nazarbayev University

Stefan Scholtes

Judge Business School

Date Written: 19 2001 4,

Abstract

We develop a nonparametric test of productive efficiency that accounts for thepossibility of errors-in-variables. The test allows for statistical inference based on theextreme value distribution of the L?? norm. In contrast to the test proposed by Varian,H (1985): 'Nonparametric Analysis of Optimising Behaviour with MeasurementError, Journal of Econometrics 30, 445-458, our test can be computed using simpleenumeration algorithms or linear programming. An empirical application for theDutch electricity sector illustrates the proposed test procedure.

Keywords: nonparametric production analysis, data envelopment analysis (DEA), errors-in-variables, hypothesis testing, extreme value theory

JEL Classification: M, G3, C14

Suggested Citation

Kuosmanen, Timo and Post, Thierry and Scholtes, Stefan, Testing for Productive Efficiency with Errors-in-Variables: With an Application to the Dutch Electricity Sesctor (19 2001 4,). ERIM Report Series Reference No. ERS-2001-22-F&A. Available at SSRN: https://ssrn.com/abstract=370882

Timo Kuosmanen (Contact Author)

Aalto University School of Business ( email )

P.O. Box 1210
Runeberginkatu 22-24
Helsinki, Finland 00101
Finland

HOME PAGE: http://www.aalto.fi

Thierry Post

Graduate School of Business of Nazarbayev University ( email )

53 Kabanbay Batyra Avenue
Astana, 010000
Kazakhstan

Stefan Scholtes

Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

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