Parametric estimation of a gauge function and a measure of technical efficiency

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yongseung Han ◽  
Thomas Littlefield ◽  
Myeong Hwan Kim
Keyword(s):  
Technical Efficiency ◽  
Design Methodology ◽  
Profit Maximization ◽  
Gauge Function ◽  
Parametric Estimation ◽  
Distance Functions ◽  
Competitive Market ◽  
Technical Inefficiency ◽  
Content Type ◽  
Inputs And Outputs

PurposeThis paper proposes the use of a gauge function as a measure of technical efficiency. The measure of technical inefficiency from a gauge function is desirable as the estimation of a gauge function is not subject to the endogeneity problem under the behavioral assumption of profit maximization in the competitive market.Design/methodology/approachThe authors address three important properties of a gauge function, i.e. linear homogeneity, monotonicity and convexity in inputs and outputs, and show how such properties are utilized in its estimation. Then, the authors apply the estimation of a gauge function to US Blacksmiths in 1850 and 1880 to show that a failure to satisfy such properties may lead to an incorrect inference on the technical efficiency.FindingsThe authors find that the Blacksmiths in the 1850s were technically more efficient than the ones in the 1880s, indicating technical regress in Blacksmithing when the properties are satisfied.Originality/valueThis paper introduces a measure of technical inefficiency from a gauge function and shows how to estimate the gauge function parametrically for the measure. The authors show McFadden's gauge function and its properties, which differ from the properties of other distance functions. The authors emphasize linear homogeneity as well as monotonicity and convexity in inputs and outputs, which must be satisfied in the estimation of a gauge function.

scholarly journals Investigation on firm efficiency: evidence from selected Asia-Pacific countries

2018 ◽  
Vol 25 (8) ◽  
pp. 3062-3080 ◽  
Author(s):  
Khar Mang Tan ◽  
Fakarudin Kamarudin ◽  
Amin Noordin Bany-Ariffin ◽  
Norhuda Abdul Rahim
Keyword(s):  
Technical Efficiency ◽  
Small Firms ◽  
Banking Sector ◽  
Profit Maximization ◽  
Asia Pacific ◽  
Scale Efficiency ◽  
Scale Level ◽  
Firm Efficiency ◽  
Content Type ◽  
Parametric Data

Purpose The purpose of this paper is to examine the firm efficiency or technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE) in the selected developed and developing Asia-Pacific countries. Design/methodology/approach The sample consists of a sum of 700 firms in selected developed and developing Asia-Pacific countries over the period from 2009 to 2015. The non-parametric data envelopment analysis under the production approach is used to investigate firm efficiency. Findings On average, this paper discovers that the firms in selected Asia-Pacific countries are moderately efficient. Scale inefficiency (SIE) is found to be the dominant source of firms’ technical inefficiency. The analysis of return to scale shows that the large firms tend to operate at decreasing return to scale level, while the small firms tend to operate at increasing return to scale level. Practical implications The findings from this paper provide significant insights to the policy makers and firm managers in promoting the efficient firms of Asia-Pacific countries. Originality/value The present paper conducts a critical analysis on return to scale in the firms sector of Asia-Pacific context, which is ignored by the past studies on firm efficiency since the analysis of return to scale is mostly emphasized on banking sector. The precise nature of SIE is important for a firm to be efficient in achieving the firm’s primary goals of profit maximization and sustaining market competitiveness.

Optimal trade-in and third-party collection authorization strategies under trade-in subsidy policy

Kybernetes ◽  
2018 ◽  
Vol 47 (5) ◽  
pp. 854-872 ◽  
Author(s):  
Kaiying Cao ◽  
Qiushi Bo ◽  
Yi He
Keyword(s):  
Design Methodology ◽  
Profit Maximization ◽  
The Other ◽  
Third Party ◽  
Subsidy Policy ◽  
Content Type ◽  
The Third ◽  
Optimal Decisions ◽  
The Third Party ◽  
Practical Implications

Purpose This paper aims to study whether the recycling of a third party competes with the trade-in service of a manufacturer, and explores the optimal trade-in and third-party collection authorization strategies for the manufacturer. Design/methodology/approach According to whether to authorize a third party to collect its used products, the manufacturer has two choices: one is not authorization (NA); the other is authorization (A). This paper uses profit-maximization model to investigate the optimal decisions of the manufacturer and the third party under NA and A, respectively, and then explores which choice is better for the manufacturer. Findings It is observed that there is a competition between trade-in service and third-party recycling when the durability parameter of the used product is relatively small. Moreover, when the durability parameter of the used product is relatively large, A is always better choice for the manufacturer; otherwise, NA is a better choice except for the case that the unit trade-in subsidy is low and the salvage of the used product is high. Practical implications These results provide managerial insights for the manufacturer and the third party to make decisions in the field of recycling. Originality/value This paper is among the first papers to study the competition between trade-in program and third party’s collecting program under government’s trade-in subsidy policy. Moreover, this paper presents the conditions under which the manufacturer should authorize or not authorize the third party to collect its used products.

Allocative and technical efficiency of New Zealand Banks

2016 ◽  
Vol 24 (4) ◽  
pp. 574-587
Author(s):  
Paul Rouse ◽  
David Tripe
Keyword(s):  
New Zealand ◽  
Technical Efficiency ◽  
Design Methodology ◽  
Allocative Efficiency ◽  
Improve Performance ◽  
Data Set ◽  
Content Type ◽  
Academic Literature ◽  
Price Effects ◽  
Technical And Allocative Efficiency

Purpose Paying too much for funding or failing to obtain adequate returns for lending and interest-bearing assets because of inappropriate mix is just as much a source of inefficiency in banking as overutilisation of input resources. The purpose of this research is to examine bank performance in terms of both technical and allocative efficiency. Design/methodology/approach This paper uses an extensive quarterly data set from New Zealand (NZ), which allows a decomposition of interest costs and revenues into quantity and price effects to explore the factors, including both technical and allocative efficiency, that impact changes in banks’ costs and revenues. Findings The research finds that focusing solely on technical efficiency can give a misleading impression of banking performance in our NZ sample. The inclusion of allocative efficiency measurement shows greater variability of performance, as well as highlighting changes in the mix of inputs and outputs needed for banks to improve performance. Originality/value A focus on prices and allocative efficiency has received little attention in the academic literature on banking. This paper shows how banking data can be decomposed into the respective price and quantity components.

Performance and access to finance in Indonesian horticulture

2017 ◽  
Vol 119 (3) ◽  
pp. 625-638 ◽  
Author(s):  
Eliana Wulandari ◽  
Miranda P.M. Meuwissen ◽  
Maman H. Karmana ◽  
Alfons G.J.M. Oude Lansink
Keyword(s):  
Technical Efficiency ◽  
Design Methodology ◽  
Positive Association ◽  
Data Envelopment ◽  
Truncated Regression ◽  
Access To Finance ◽  
Important Condition ◽  
Content Type ◽  
Using Data ◽  
Agricultural Input

Purpose Access to finance is an important condition for the development of agriculture and the farms’ performance. The purpose of this paper is to analyse the association between the technical efficiency of horticultural farms and access to finance from different finance providers. Design/methodology/approach Data were collected from 434 farmers who produce mango, mangosteen, chili and red onion in Indonesia. Data were subsequently analysed using data envelopment analysis and bootstrap truncated regression. Findings The results show that commercial credit from banks and in-kind finance provided through farmers’ associations have a positive association with the technical efficiency of some types of horticultural farms. Commercial credit from micro finance institution and flexible payment of inputs to the agricultural input kiosk generally have negative associations, especially with the technical efficiency of mangosteen farms. Subsidised credit from banks and in-kind finance from traders have both positive and negative associations with the technical efficiency of the horticultural farms. Originality/value This study adds to the existing literature by analysing access to finance from a broader range of finance providers and its relation to technical efficiency.

Estimating contractors’ efficiency with panel data

2014 ◽  
Vol 14 (3) ◽  
pp. 274-291 ◽  
Author(s):  
Yat Hung Chiang ◽  
Eddie W.L. Cheng
Keyword(s):  
Construction Industry ◽  
Technical Efficiency ◽  
Design Methodology ◽  
Data Envelopment ◽  
Content Type ◽  
The Past ◽  
Literature Base ◽  
Output Side ◽  
Dea Method ◽  
Practical Implications

Purpose – This paper aims to explore the use of the data envelopment analysis (DEA), Cobb-Douglas and translog production function methods in estimating contractors’ efficiency. Design/methodology/approach – In this paper, the DEA, translog and Cobb-Douglas methods were used to estimate the technical efficiency of 23 contractors in Hong Kong from 2003 to 2009. For this research, four input and three output variables were identified. Findings – The results suggest that the efficiency scores obtained from the DEA method were significantly different from those obtained from the translog and Cobb-Douglas methods, while the efficiency scores from the translog method were similar to those from the Cobb-Douglas method. The DEA method further reveals that the company had poor utilisation of its resources over the past few years. On the output side, the current ratio was too small, implying that the company suffered from excess current liabilities relative to its current assets. Research limitations/implications – Application of efficiency measurement in the built environment is still in its infancy. The current research, therefore, calls for more research to be undertaken to establish the applied literature base for the construction industry. Practical implications – The DEA method helps the inefficient company explore ways to improve the utilisation of the inputs as well as the process and to maximise the outputs. Originality/value – Knowing the relative performance of contractors helps understand their competitiveness in the construction industry. By estimating their technical efficiency, contractors can improve the conditions for enhancing performance.

Designing robust model for banks benchmarking based on Rembrandt method and DEA

2017 ◽  
Vol 24 (2) ◽  
pp. 431-444 ◽  
Author(s):  
Amir Karbassi Yazdi ◽  
Farshid Abdi
Keyword(s):  
Design Methodology ◽  
Data Envelopment ◽  
Content Type ◽  
Operation Costs ◽  
Robust Model ◽  
Net Profit ◽  
Dea Method ◽  
Public Banks ◽  
Decision Making Units ◽  
Inputs And Outputs

Purpose The purpose of this paper is to find excellent banks on the basis of identified variables. First of all, banks are evaluated based on operation costs, deposits, staff, investments, net profit, and loans variables. Subsequently, these variables are categorized into inputs and outputs. The performances of the banks based on these variables are analyzed by data envelopment analysis (DEA) method to find efficiency and inefficiency of decision making units (DMUs). Design/methodology/approach This research is aimed to determine the best banks based on predetermined indicators. The indicators are categorized into inputs and outputs. DEA method is used to find efficiency and inefficiency of DMU. However, the aim is to find the efficient banks and to implement the model by using AP Super Efficiency method in order to find the most efficient unit for benchmarking. However, some inputs and outputs have more priority for banks than the others, as a result it will require some changes. Findings The results indicate that among 13 banks, including ten public and three private, solely five public banks are efficient. Moreover, DEA is used as a benchmarking tool for inefficient banks to be efficient. Among these banks ten of them are public banks and three are private. Among efficient ones, all are public banks. Moreover, five of public banks and three of private are inefficient. Originality/value In some cases, inputs and outputs have more priority for DMs than the others, as a result it will require some changes. Also, if one of the inputs or outputs is larger in number than the others, the DMU becomes efficient, despite its low priority. Thus, for solving this problem, the indicators of this research are ranked by Rembrandt method considering the existing ones to find the best banks (best DMU) based on their performance and the relevant indicators.

scholarly journals The efficiency of Jordan insurance companies and its determinants using DEA, slacks, and logit models

2019 ◽  
Vol 26 (1) ◽  
pp. 153-166 ◽  
Author(s):  
Mutasem Mahmoud Jaloudi
Keyword(s):  
Technical Efficiency ◽  
Design Methodology ◽  
Insurance Companies ◽  
Data Envelopment ◽  
Logit Models ◽  
Resource Base ◽  
Return On Assets ◽  
Content Type ◽  
Insurance Law ◽  
Type Size

Purpose The purpose of this paper is to evaluate the technical efficiency in the Jordan insurance market and examine the internal and external determinants that appear to affect the technical efficiency of the insurance companies. Design/methodology/approach The study used panel data for 22 insurance companies operating inside Jordan over the period 2000–2016. The author used the data envelopment analysis to evaluate the technical efficiency scores, slacks-based and logit models to examine the efficiency determinants. Findings The study found that there is a slight development of technical efficiency for the Jordanian insurance companies during the study period. In addition, there is a substantial efficiency difference among insurance companies each year, and there is a variation at the level of efficiency for each company in each year. The results also showed that owners’ equities are among the most important internal determinants of companies’ efficiency, and there is a significant correlation between type, size and return on assets of the insurer and its efficiency. Originality/value This study provides insurance management with relevant indicators that would guide them to make efficient use of the resource base. The period of study also covers the period following the adoption of the insurance law and the issuance of most of the legislation related to the work of insurance companies.

Deregulation, technical efficiency and production risk in rice farming: evidence from Zhejiang Province, China

2020 ◽  
Vol 12 (4) ◽  
pp. 605-622
Author(s):  
Juanli Wang ◽  
Xiaoli Etienne ◽  
Yongxi Ma
Keyword(s):  
Technical Efficiency ◽  
Performance Metrics ◽  
Production Performance ◽  
Land Market ◽  
Stochastic Production Frontier ◽  
Production Frontier ◽  
Technical Inefficiency ◽  
Production Risk ◽  
Content Type ◽  
Stochastic Production

PurposeThe 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/approachUsing 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.FindingsEstimation 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 efficiencyOriginality/valueFirst, 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.

Lifestyle entrepreneurs in winemaking

2019 ◽  
Vol 31 (3) ◽  
pp. 385-405 ◽  
Author(s):  
Andrea Dominici ◽  
Fabio Boncinelli ◽  
Enrico Marone
Keyword(s):  
Economic Theory ◽  
Family Business ◽  
Design Methodology ◽  
Profit Maximization ◽  
Mainstream Economic ◽  
Content Type ◽  
Explorative Study ◽  
Hands On ◽  
Depth Interviews

Purpose The purpose of this study is to investigate non-pecuniary motivations and benefits of involvement in the wine business. Combining these motives with winery owners’ characteristics, attitudes and implemented strategies, the aim is to identify different winery owners’ styles in small-medium family-run firms. Design/methodology/approach The applied method is a qualitative explorative study involving in-depth interviews with Tuscan winery owners. They have hands-on involvement in the winemaking process, own a family business and supervise all of the production phases, from grape growing to bottling. Findings The study highlights the key role of non-economic motivations for winery owners. Passion, independence and a desire to live close to nature are predominant compared to pecuniary motivations, such as profit maximization. Therefore, the “lifestyle-oriented” style, characterized especially by the achievement of non-pecuniary benefits, represents the prevailing style amongst the interviewed winery owners, in contrast to the “business-oriented” style, which features typical producers described by mainstream economic theory. Originality/value The findings of this study are pivotal because they can facilitate a better understanding of how family-run wineries make decisions related to, e.g. firm size, staff management, product quality, exports and sustainability.

Endogenous consumers’ preferences as drivers of green corporate social responsibility

2018 ◽  
Vol 15 (4) ◽  
pp. 424-450 ◽  
Author(s):  
Gustavo Barboza
Keyword(s):  
Design Methodology ◽  
Profit Maximization ◽  
Information Asymmetries ◽  
Negative Externalities ◽  
Socially Responsible ◽  
Content Type ◽  
Safe Technology ◽  
Product Features ◽  
Conventional Technology ◽  
Corporate Social

Purpose This paper’s main objective is to expand the demand-driven strategic field by developing a model where endogenization of consumers’ preferences for clean(er) products becomes the driver of the firm green corporate social responsible (GCSR) profit maximization behavior. Design/methodology/approach The model proposes that in undifferentiated markets, firms using a conventional technology manage production-related negative externalities via information asymmetries. In turn, when consumer socially responsible individuals (CnSR) discover the nature of the information asymmetries, they then reveal their preferences. The building block of the model is that CnSR derive value both from intrinsic as well as extrinsic product features, and derive negative satisfaction from the production negative externalities. In turn, CnSR preferences offer a higher willingness to pay for a combined intrinsic (private good and direct utility) and extrinsic (public good and feel good–do good utility) product. Findings The model demonstrates that the firm’s GCSR behavior is a technological-driven process directly affecting the extrinsic component of the product through the development of a safe technology, and exclusively targeting CnSR type of consumers. The corollary of the model is that for the firm pursuing a GCSR behavior, the development of a competitive advantage with higher firm performance leads to profit maximization when exclusively serving the GCSR segment of the market. Thus, GCSR is the result of unusual innovation efforts. Originality/value This paper presents a model that expands the field of strategic management through the demand-driven incorporation and respective modeling. To the best of the author’s knowledge, this is the first model to explicitly develop this relationship in this format.

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