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Book part
Publication date: 21 December 2010

Saleem Shaik and Ashok K. Mishra

In this chapter, we utilize the residual concept of productivity measures defined in the context of normal-gamma stochastic frontier production model with heterogeneity to…

Abstract

In this chapter, we utilize the residual concept of productivity measures defined in the context of normal-gamma stochastic frontier production model with heterogeneity to differentiate productivity and inefficiency measures. In particular, three alternative two-way random effects panel estimators of normal-gamma stochastic frontier model are proposed using simulated maximum likelihood estimation techniques. For the three alternative panel estimators, we use a generalized least squares procedure involving the estimation of variance components in the first stage and estimated variance–covariance matrix to transform the data. Empirical estimates indicate difference in the parameter coefficients of gamma distribution, production function, and heterogeneity function variables between pooled and the two alternative panel estimators. The difference between pooled and panel model suggests the need to account for spatial, temporal, and within residual variations as in Swamy–Arora estimator, and within residual variation in Amemiya estimator with panel framework. Finally, results from this study indicate that short- and long-run variations in financial exposure (solvency, liquidity, and efficiency) play an important role in explaining the variance of inefficiency and productivity.

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Maximum Simulated Likelihood Methods and Applications
Type: Book
ISBN: 978-0-85724-150-4

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Article
Publication date: 1 September 2005

George Baltas

The purpose of this paper is to consider a new application of stochastic frontier analysis, in which the method is applied to demand data for a food product category, in…

Abstract

Purpose

The purpose of this paper is to consider a new application of stochastic frontier analysis, in which the method is applied to demand data for a food product category, in an attempt to benchmark category consumption and segment food consumers.

Design/methodology/approach

In a unified, two‐stage approach, a stochastic frontier model is first estimated and subsequently deviations from the demand frontier are regressed on customer characteristics. The method is illustrated in scanner panel data.

Findings

A frontier demand function estimated in scanner data of a frequently‐bought food category has significant and consistent parameters. Specific descriptor variables can explain excessive category demand and profile customers with considerable sales potential.

Research limitations/implications

More work is needed to generalise the usefulness of the proposed model in different food categories. Future research may employ alternative functional specifications and explanatory variables.

Practical implications

The empirical identification of salient characteristics improves consumer understanding and can assist in the design of data‐driven marketing action. Applied researchers can use marketing and demographic variables that are found in standard consumer panels to estimate frontier models.

Originality/value

The paper introduces stochastic frontier analysis as a means to determine consumer differences in food demand. This is an important area for retailers, producers and researchers.

Details

British Food Journal, vol. 107 no. 9
Type: Research Article
ISSN: 0007-070X

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Article
Publication date: 4 November 2014

Syed Manzur Quader and Michael Dietrich

Using a panel of 1,122 UK firms listed on the London Stock Exchange over the period of 1981-2009, corporate efficiencies are predicted in this paper as inverse proxies of…

Abstract

Purpose

Using a panel of 1,122 UK firms listed on the London Stock Exchange over the period of 1981-2009, corporate efficiencies are predicted in this paper as inverse proxies of agency cost and the agency cost hypotheses are tested. The paper aims to discuss this issue.

Design/methodology/approach

Stochastic frontier analysis is used to estimate corporate efficiency of firms, but from two different perspectives. The long-run and short-run corporate efficiencies are predicted focussing on modern approach of value maximization and traditional approach of profit maximization, respectively.

Findings

The estimation results reveal that, an average firm in the sample achieves 74.5 percent of its best performing peer's market value and 86.6 percent of its best performing peer's profit and both of them are highly significant in the analysis. The long-run market value efficiency supports the agency cost of outside equity and the short-run profit efficiency supports the agency cost of outside debt hypothesis. Also there is a positive rank correlation between these two efficiencies which confirms that an average firm in the UK suffers from inefficiency or agency conflicts to a certain extent, no matter whether the firm is driven by short-run or long-run growth perspectives.

Research limitations/implications

The predicted broad measures of agency costs in the paper have wider implications in enhancing the understanding of the UK firms’ corporate performance especially when they operate under a relatively free and market based governance and financial system.

Originality/value

The work is distinguished by the large panel of UK firms and a long period of time that is considered. Emphasizing on the empirical implications of the distinctions between short-run and long-run efficiency is also novel.

Details

International Journal of Productivity and Performance Management, vol. 63 no. 8
Type: Research Article
ISSN: 1741-0401

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Article
Publication date: 1 April 2014

Carlos Pestana Barros, Vincenzo Scafarto and António Samagaio

This paper analyses the cost efficiency of Italian football clubs using a stochastic frontier model. The frontier estimation confirmed that the model fits the data well…

Abstract

This paper analyses the cost efficiency of Italian football clubs using a stochastic frontier model. The frontier estimation confirmed that the model fits the data well with all coefficients correctly signed and in line with the theoretical requirements. Marketing and Sponsorship is taken into account as an explanatory variable and the factors which contributed to these findings, as well as other policy implications, are provided.

Details

International Journal of Sports Marketing and Sponsorship, vol. 15 no. 4
Type: Research Article
ISSN: 1464-6668

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Book part
Publication date: 31 May 2016

Chunyan Yu

This chapter provides a survey of alternative methodologies for measuring and comparing productivity and efficiency of airlines, and reviews representative empirical…

Abstract

This chapter provides a survey of alternative methodologies for measuring and comparing productivity and efficiency of airlines, and reviews representative empirical studies. The survey shows the apparent shift from index procedures and traditional OLS estimation of production and cost functions to stochastic frontier methods and Data Envelopment Analysis (DEA) methods over the past three decades. Most of the airline productivity and efficiency studies over the last decade adopt some variant of DEA methods. Researchers in the 1980s and 1990s were mostly interested in the effects of deregulation and liberalization on airline productivity and efficiency as well as the effects of ownership and governance structure. Since the 2000s, however, studies tend to focus on how business models and management strategies affect the performance of airlines. Environmental efficiency now becomes an important area of airline productivity and efficiency studies, focusing on CO2 emission as a negative or undesirable output. Despite the fact that quality of service is an important aspect of airline business, limited attempts have been made to incorporate quality of service in productivity and efficiency analysis.

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Book part
Publication date: 14 September 2007

Chris Nash and Andrew Smith

Abstract

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Handbook of Transport Modelling
Type: Book
ISBN: 978-0-08-045376-7

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Book part
Publication date: 18 October 2019

Eri Nakamura, Takuya Urakami and Kazuhiko Kakamu

This chapter examines the effect of the division of labor from a Bayesian viewpoint. While organizational reforms are crucial for cost reduction in the Japanese water…

Abstract

This chapter examines the effect of the division of labor from a Bayesian viewpoint. While organizational reforms are crucial for cost reduction in the Japanese water supply industry, the effect of labor division in intra-organizational units on total costs has, to the best of our knowledge, not been examined empirically. Fortunately, a one-time survey of 79 Japanese water suppliers conducted in 2010 enables us to examine the effect. To examine this problem, a cost stochastic frontier model with endogenous regressors is considered in a cross-sectional setting, because the cost and the division of labor are regarded as simultaneously determined factors. From the empirical analysis, we obtain the following results: (1) total costs rise when the level of labor division becomes high; (2) ignoring the endogeneity leads to the underestimation of the impact of labor division on total costs; and (3) the estimation bias on inefficiency can be mitigated for relatively efficient organizations by including the labor division variable in the model, while the bias for relatively inefficient organizations needs to be controlled by considering its endogeneity. In summary, our results indicate that integration of internal sections is better than specialization in terms of costs for Japanese water supply organizations.

Details

Topics in Identification, Limited Dependent Variables, Partial Observability, Experimentation, and Flexible Modeling: Part B
Type: Book
ISBN: 978-1-83867-419-9

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Article
Publication date: 10 July 2020

Juanli Wang, Xiaoli Etienne and Yongxi Ma

The purpose of this paper is to evaluate the technical efficiency and production risk in China's rice production and examine the effect of factor market reform on these…

Abstract

Purpose

The purpose of this paper is to evaluate the technical efficiency and production risk in China's rice production and examine the effect of factor market reform on these two agricultural performance metrics.

Design/methodology/approach

Using an unbalanced farm-level panel data with 2,193 observations on 329 rice farms from 2004 to 2016, the authors estimate a translog stochastic production frontier model that accounts for both technical inefficiency and production risk. A one-step procedure through the maximum likelihood method that combines the stochastic production frontier, technical inefficiency and production risk functions is used to circumvent the bias problem often found in the conventional two-step model.

Findings

Estimation results show that both land and labor market reforms significantly improved the level of technical efficiency over the years, although the effect of land market deregulation is of a much higher magnitude compared to the latter. The land market reform, however, has also increased the risk of production. The authors further find that a higher proportion of hired labor in total labor cost helps lower production risk, while also acting to decrease technical efficiency. Additionally, agricultural subsidies not only increased the output variability but also lowered technical efficiency

Originality/value

First, the authors evaluate the effect of market deregulation on technical efficiency and production risk under a stochastic frontier framework that simultaneously accounts for both production performance metrics, which is important from a statistical point of view. Further, the authors exploit both cross-sectional and time-series variations in a panel setting to more accurately estimate the technical inefficiency scores and production risk for individual farmers, and investigate how the exogenous land and labor market reforms influence these two production performance measures in China's rice farming. This is the first study in the literature to analyze these questions under a panel framework.

Details

China Agricultural Economic Review, vol. 12 no. 4
Type: Research Article
ISSN: 1756-137X

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Article
Publication date: 17 July 2017

Murugesan Ramasamy, Dominic Dhanapal and Poovendhan Murugesan

When spillovers are measured at a national level, the regional benefits may not be identified if they are too small. Very few studies that examined how FDI impacts the…

Abstract

Purpose

When spillovers are measured at a national level, the regional benefits may not be identified if they are too small. Very few studies that examined how FDI impacts the regional productivity of the host nations have shown mixed results. The evidence is still scarce and little is known about how the regional penetration of FDI affects the regional productivity performance. The trajectory of regional productivity growth in India has been a subject of scrutiny and intense debates and remains less systematically investigated. The purpose of this paper is to fill this lacuna by investigating the effect of FDI spillover on regional productivity in Indian states.

Design/methodology/approach

Using data supplied by the Central Statistical Organization, National Statistical Organization, National Sample Survey Office, and National Accounts Statistics, Government of India at the Indian Ministry of Statistics and Programme Implementation, first, the study employs stochastic frontier model to explore the extent to which FDI spillover contributes to the regional productivity from panel data of 28 Indian states over 1993-2013. Second, the study examines the roles of absorptive ability and technology gap on productivity effect of FDI. Third, by adopting SFA, we measure productivity growth of Indian states in terms of Malmquist productivity index. Fourth, India’s development is imbalanced. To analyze the imbalance due to skewed distribution of FDI among Indian states, Indian states are divided into three regions, and the spillover effects of FDI on TFP in these regions are explored.

Findings

The results on the effects of FDI spillover on regional productivity in India using stochastic frontier and panel data from 28 states over 1993-2013 show that R&D, technology import, human capital, and various specifications of FDI have a significant impact on the regional productivity in India except technology gap. Study does not find support for the resource curse hypothesis in Indian states. Productivity growth for India using the Malmquist TFP index based on the stochastic frontier shows positive impact. The TFP growth in the three regions of India is turned to be differently attributed by the FDI spillover.

Originality/value

Little is known about how the regional penetration of FDI affects the regional productivity performance. This research aims to fill this lacuna by investigating the effect of FDI spillover on regional productivity in Indian states which has been a subject of scrutiny and intense debates.

Details

International Journal of Emerging Markets, vol. 12 no. 3
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 30 April 2021

Habtamu Alem

The study measures the technology gap and performance of the Norwegian dairy farms accounting for farm heterogeneity.

Abstract

Purpose

The study measures the technology gap and performance of the Norwegian dairy farms accounting for farm heterogeneity.

Design/methodology/approach

The analysis was based on a meta-frontier and unbalanced farm-level panel data for 1991–2014 from 417 Norwegian farms specialized in dairy production in five regions of Norway.

Findings

The result of the analysis provides empirical evidence of regional differences in technical efficiencies, technological gap ratios (TGRs) and input use. Consequently, the paper provides some insights into policies to increase the efficiency of dairy production in the country across all regions.

Research limitations/implications

The author used a meta-frontier approach for modeling regional differences based on a single-output production function specification. This approach has commonly been used in the economics literature since Battese et al. (2004). To get more informative and useful results, it would be necessary to repeat the analysis within terms of multiple input-output frameworks using, for instance, the input distance function approach. Moreover, the author estimated the meta-frontier using the non-parametric approach, thus it is also a need for further analysis if the values are different by estimating using a parametric approach.

Practical implications

One implication for farmers (and their advisers) is that dairy farms in all regions used available technology in the area sub-optimally. Thus, those lagging the best-performing farms need to look at the way the best-performing farmers are operating. Policymakers might reduce the gap is through training, including sharing information about relevant technologies from one area to another, provided that the technologies being shared fit the working environment of the lagging area. Moreover, some of the dairy technologies they use may not fit other regions, suggesting that agricultural policies that aim to encourage efficient dairy production, such as innovation of improved technology (like breeding, bull selection and improved feed varieties) through research and development, need to account the environmental differences between regions.

Social implications

For both taxpayers and consumers, one implication is that the contributions they pay that go to subsidize dairy farmers appear to bring some benefits in terms of more efficient milk production that, in turn, increases the supply of some foods so possibly making food prices more affordable.

Originality/value

The paper contributes to the literature in several ways. In contrast to Battese et al. (2004), the author accounts for farm-level performance differences by applying the model devised by Greene (2005), thus may serve as a model for future studies at more local levels or of other industries. Moreover, the author is fortunate to able to use a large level farm-level panel data from 1991 to 2014.

Details

International Journal of Productivity and Performance Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1741-0401

Keywords

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