Radial and nonradial measures of technical efficiency: An empirical illustration for Belgian local governments using an FDH reference technology

This paper serves two purposes. First, we argue that radial efficiency measures are inappropriate for the Free Disposal Hull (FDH) technology, and we provide a comparative analysis of alternative nonradial measures. In particular, using information on Belgian local government expenditures and output indicators we implement various radial and nonradial measures on the FDH reference technology, and we investigate to which extent these efficiency measures imply different distributions and rankings. Second, we analyze the patterns of measured technical efficiency implied by the various indices. Specifically, we investigate whether different measures make any substantial difference for the explanation of the calculated inefficiencies. The empirical results suggest that more important differences in rankings exist between radial and nonradial measures than between different nonradial alternatives; moreover, the radial and the nonradial efficiency measures do yield a somewhat different pattern of explanation.This is a revision of a paper presented at the 38th Conference of the Applied Econometrics Association in Athens (April 12–13, 1993). Comments of R. Goudriaan, Henry Tulkens, and two anonymous referees are gratefully acknowledged.     

Technical efficiency measures for dairy farms using panel data: A comparison of alternative model specifications

This article examines the impact of fixed effects production functions vis-à-vis stochastic production frontiers on technical efficiency measures. An unbalanced panel consisting of 96 Vermont dairy farmers for the 1971–1984 period was used in the analysis. The models examined incorporated both time-variant and time-invariant technical efficiency. The major source of variation in efficiency levels across models stemmed from the assumption made concerning the distribution of the one-sided term in the stochastic frontiers. In general, the fixed effects technique was found superior to the stochastic production frontier methodology. Despite the fact that the results of various statistical tests revealed the superiority of some specifications over others, the overall conclusion of the study is that the efficiency analysis was fairly consistent throughout all the models considered.