Testing for Productive Efficiency with Errors-in-Variables: With an Application to the Dutch Electricity Sesctor
21 Pages Posted: 10 Feb 2003
Date Written: 19 2001 4,
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
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