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Estimating alternative technology sets in nonparametric efficiency analysis : restriction tests for panel and clustered data

Neumann, Anne; Nieswand, Maria and Schubert, Torben LU (2016) In Journal of Productivity Analysis 45(1). p.35-51
Abstract

Nonparametric efficiency analysis has become a widely applied technique to support industrial benchmarking as well as a variety of incentive-based regulation policies. In practice such exercises are often plagued by incomplete knowledge about the correct specifications of inputs and outputs. Simar and Wilson (Commun Stat Simul Comput 30(1):159–184, 2001) and Schubert and Simar (J Prod Anal 36(1):55–69, 2011) propose restriction tests to support such specification decisions for cross-section data. However, the typical oligopolized market structure pertinent to regulation contexts often leads to low numbers of cross-section observations, rendering reliable estimation based on these tests practically unfeasible. This small-sample problem... (More)

Nonparametric efficiency analysis has become a widely applied technique to support industrial benchmarking as well as a variety of incentive-based regulation policies. In practice such exercises are often plagued by incomplete knowledge about the correct specifications of inputs and outputs. Simar and Wilson (Commun Stat Simul Comput 30(1):159–184, 2001) and Schubert and Simar (J Prod Anal 36(1):55–69, 2011) propose restriction tests to support such specification decisions for cross-section data. However, the typical oligopolized market structure pertinent to regulation contexts often leads to low numbers of cross-section observations, rendering reliable estimation based on these tests practically unfeasible. This small-sample problem could often be avoided with the use of panel data, which would in any case require an extension of the cross-section restriction tests to handle panel data. In this paper we derive these tests. We prove the consistency of the proposed method and apply it to a sample of US natural gas transmission companies from 2003 through 2007. We find that the total quantity of natural gas delivered and natural gas delivered in peak periods measure essentially the same output. Therefore only one needs to be included. We also show that the length of mains as a measure of transportation service is non-redundant and therefore must be included.

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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Benchmarking models, Bootstrap, Data envelopment analysis, Network industries, Nonparametric efficiency estimation, Subsampling, Testing restrictions
in
Journal of Productivity Analysis
volume
45
issue
1
pages
17 pages
publisher
Springer Netherlands
external identifiers
  • Scopus:84954371759
  • WOS:000369916200003
ISSN
0895-562X
DOI
10.1007/s11123-015-0461-z
language
English
LU publication?
yes
id
bbf4506d-b1a3-44fd-aba6-b3cf392ac798
date added to LUP
2016-05-18 13:25:00
date last changed
2017-01-01 08:26:12
@article{bbf4506d-b1a3-44fd-aba6-b3cf392ac798,
  abstract     = {<p>Nonparametric efficiency analysis has become a widely applied technique to support industrial benchmarking as well as a variety of incentive-based regulation policies. In practice such exercises are often plagued by incomplete knowledge about the correct specifications of inputs and outputs. Simar and Wilson (Commun Stat Simul Comput 30(1):159–184, 2001) and Schubert and Simar (J Prod Anal 36(1):55–69, 2011) propose restriction tests to support such specification decisions for cross-section data. However, the typical oligopolized market structure pertinent to regulation contexts often leads to low numbers of cross-section observations, rendering reliable estimation based on these tests practically unfeasible. This small-sample problem could often be avoided with the use of panel data, which would in any case require an extension of the cross-section restriction tests to handle panel data. In this paper we derive these tests. We prove the consistency of the proposed method and apply it to a sample of US natural gas transmission companies from 2003 through 2007. We find that the total quantity of natural gas delivered and natural gas delivered in peak periods measure essentially the same output. Therefore only one needs to be included. We also show that the length of mains as a measure of transportation service is non-redundant and therefore must be included.</p>},
  author       = {Neumann, Anne and Nieswand, Maria and Schubert, Torben},
  issn         = {0895-562X},
  keyword      = {Benchmarking models,Bootstrap,Data envelopment analysis,Network industries,Nonparametric efficiency estimation,Subsampling,Testing restrictions},
  language     = {eng},
  month        = {02},
  number       = {1},
  pages        = {35--51},
  publisher    = {Springer Netherlands},
  series       = {Journal of Productivity Analysis},
  title        = {Estimating alternative technology sets in nonparametric efficiency analysis : restriction tests for panel and clustered data},
  url          = {http://dx.doi.org/10.1007/s11123-015-0461-z},
  volume       = {45},
  year         = {2016},
}