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

University of Cambridge - 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,). 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

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

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