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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…

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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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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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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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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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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: 13 April 2021

Yuhe Wang, Gui Ye, Chenli Zheng and Shilian Zhang

Since China's accession of the World Trade Organization (WTO), its construction industry has attained unprecedented growth. However, for the sources of this enormous…

Abstract

Purpose

Since China's accession of the World Trade Organization (WTO), its construction industry has attained unprecedented growth. However, for the sources of this enormous growth, a controversy regarding the total factor productivity growth (TFPG) still remains in production practice and extant studies. In view of this, the purpose of this paper is to measure TFPG and to explore its sources in the industry post-WTO accession.

Design/methodology/approach

This study presents an innovative source analysis of TFPG. Stochastic frontier approach is adopted to measure TFPG and to explore its sources by decomposing TFPG into technical progress (TP), technical efficiency change (TEC), allocative efficiency change (AEC) and scale efficiency change (SEC). Although China joined WTO in 2001, to provide an effective baseline, the study period is from 2000 to 2017.

Findings

The empirical results reveal that TFPG presented an overall downward evolutionary trend, but it still maintained a high growth post-WTO accession. From the perspective of decomposition, TP was the main source of TFPG. Furthermore, as a neglected source, interaction effects among TP, TEC, AEC and SEC have been demonstrated to have a significant influence on the cumulative TFPG.

Practical implications

To make the results be reliable, the authors discuss the empirical findings mainly by revealing the reasons behind the evolutions of TFPG and its sources. Based on these revealed reasons, government and policy makers can further refine and summarize some more detailed and targeted policy implications to improve TFPG.

Originality/value

By providing many empirical evidences to solve the aforesaid TFPG controversy, this paper, therefore, enriches the body of knowledge on growth theories, especially at the level of industrial economics.

Details

Engineering, Construction and Architectural Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 1 January 1985

GLENVILLE RAWLINS

A firm is technically efficient when it produces the maximum level of output for a given level of input on the assumption that technology is fixed. Although the above…

Abstract

A firm is technically efficient when it produces the maximum level of output for a given level of input on the assumption that technology is fixed. Although the above definition of technical efficiency has been around for decades, economists have, for the most part, been estimating average production functions (i.e. production functions that assume that all firms are technically efficient except for random noise), and then proceeding to make inferences regarding the potential of firms from this average production function.

Details

Studies in Economics and Finance, vol. 9 no. 1
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 1 March 2003

E. Stewart Saunders

Examines 88 academic member libraries of the Association of Research Libraries (ARL) to determine their relative cost efficiency, using stochastic frontier regression and…

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Abstract

Examines 88 academic member libraries of the Association of Research Libraries (ARL) to determine their relative cost efficiency, using stochastic frontier regression and data envelopment analysis (DEA) methods. Both methods give average ARL cost efficiencies of around 80 percent. This places academic ARL libraries in the same range of efficiency as other institutions, including for‐profit and non‐profit institutions. Many libraries are above 80 percent efficiency. For those below, some speculation is given for the lower efficiency. The lack of an output measure for the use of electronic sources may contribute to lower efficiency for a few libraries. Large staff size and a large number of serial subscriptions do predict lower efficiency, but this is not a necessary consequence. The DEA model allows us to determine increasing, constant, or declining returns to scale for research libraries. From this, it appears research libraries with expenditures between $10,000,000 and $20,000,000 are operating at the most efficient scale. Since the methods used are outside the repertoire of most LIS research, a conceptual explanation is provided.

Details

The Bottom Line, vol. 16 no. 1
Type: Research Article
ISSN: 0888-045X

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Book part
Publication date: 31 May 2016

Bo Zou, Irene Kwan, Mark Hansen, Dan Rutherford and Nabin Kafle

Air carriers and aircraft manufacturers are investing in technologies and strategies to reduce fuel consumption and associated emissions. This chapter reviews related…

Abstract

Air carriers and aircraft manufacturers are investing in technologies and strategies to reduce fuel consumption and associated emissions. This chapter reviews related issues to assess airline fuel efficiency and offers various empirical evidences from our recent work that focuses on the U.S. domestic passenger air transportation system. We begin with a general presentation of four methods (ratio-based, deterministic frontier, stochastic frontier, and data envelopment analysis) and three perspectives for assessing airline fuel efficiencies, the latter covering consideration of only mainline carrier operations, mainline–subsidiary relations, and airline routing circuity. Airline fuel efficiency results in the short run, in particular the correlations of the results from using different methods and considering different perspectives, are discussed. For the long-term efficiency, we present the development of a stochastic frontier model to investigate individual airline fuel efficiency and system overall evolution between 1990 and 2012. Insight about the association of fuel efficiency with market entry, exit, and airline mergers is also obtained.

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