Non-parametric tests of productive efficiency with errors-in-variables |
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| Authors: | Timo Kuosmanen Thierry Post Stefan Scholtes |
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| Institution: | 1. Environmental Economics and Natural Resources Group, Wageningen University, P.O. Box 8130, 6700 EW Wageningen, The Netherlands;2. Rotterdam School of Economics and Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands;3. Judge Business School, University of Cambridge, Cambridge CB2 1AG, UK |
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| Abstract: | We develop a non-parametric test of productive efficiency that accounts for errors-in-variables, following the approach of Varian. 1985. Nonparametric analysis of optimizing behavior with measurement error. Journal of Econometrics 30(1/2), 445–458]. The test is based on the general Pareto–Koopmans notion of efficiency, and does not require price data. Statistical inference is based on the sampling distribution of the L∞ norm of errors. The test statistic can be computed using a simple enumeration algorithm. The finite sample properties of the test are analyzed by means of a Monte Carlo simulation using real-world data of large EU commercial banks. |
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| Keywords: | C12 C14 C61 D24 |
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