Allowing for inefficiency in parametric estimation of production functions for urban transit firms

Abstract

Efficient versus inefficient observations are first identified and evaluated numerically by the nonparametric free disposal hull (FDH) method. Next, parametric production frontiers are obtained by means of estimating translog production functions through OLS applied to the subset of efficient observations only. Technical progress is included at both stages. Monthly data from three urban transit firms in Belgium, to which this two-stage technique is applied, show widely varying degrees of efficiency over time and across firms, and much less technical progress than standard (i.e., non frontier) econometric estimates suggest.

Internal and Locational Factors Affecting Hotel Industry Efficiency: Evidence from Italian Business Corporations

“…A third intermediate approach to efficiency analysis is the semi-parametric method (Simar, 1992;Thiry and Tulkens, 1992), which combines nonparametric and parametric approaches in a two-stage framework. An application to tourism firms is presented in Bernini et al (2004).…”

Measuring the Value of Product Characteristics in the Presence of Price Dispersion

“…Therefore, an estimation of will result in an unbiased estimate of the underlying efficient technology. Although not used in the hedonic pricing literature, this two‐stage filtering approach is an accepted methodology in the production efficiency literature for finding a more statistically efficient estimator of the underlying technology (Arnold et al , ; Bardhan et al , ; Simar, ; and Thiry and Tulkens, ).…”