A new approach for technical efficiency estimation in multiple output production |
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| Affiliation: | 1. Forest Resource Economics and Management, Faculty of Forestry, University of Toronto, 33 Willcocks Street, Toronto, Ontario M5S 3B3, Canada;2. School of Economics and Management, Beijing Forestry University, Beijing 100083, China;1. Lancaster University Management School, LA1 4YX, UK;2. Athens University of Economics and Business, Athens 10434, Greece;1. Department of Economics, State University of New York, Binghamton, NY13902-6000, USA;2. Inland School of Business and Social Sciences, Inland Norway University of Applied Sciences, Pb 952, NO-2604, Lillehammer, Norway |
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| Abstract: | The nonparametric technique of Data Envelopment Analysis (DEA) has been used to measure technical efficiency. This approach has proven useful because, unlike regression analyses, it allows multiple outputs and does not require a priori functional form specification. DEA does, however, require correct model specification; inclusion of inappropriate variables or omission of relevant variables leads to distortions. The purpose of this paper is to develop an alternative methodology based on canonical correlation to measure technical efficiency for multiple output production correspondences. Using simulated data, the new methodology is compared with DEA. The results indicate that the canonical regression approach outperforms DEA in most cases. |
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