Sensitivity analysis of efficiency rankings to distributional assumptions: applications to Japanese water utilities

C-Tier
Journal: Applied Economics
Year: 2013
Volume: 45
Issue: 17
Pages: 2337-2348

Authors (2)

Shinji Yane (not in RePEc) Sanford Berg (University of Florida)

Score contribution per author:

0.503 = (α=2.01 / 2 authors) × 0.5x C-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This article examines the robustness of efficiency score rankings across four distributional assumptions for trans-log stochastic production-frontier models, using data from 1221 Japanese water utilities (for 2004 and 2005). One-sided error terms considered include the half-normal, truncated normal, exponential and gamma distributions. Results are compared for homoscedastic and doubly heteroscedastic models, where we also introduce a doubly heteroscedastic variable mean model, and examine the sensitivity of the nested models to a stronger heteroscedasticity correction for the one-sided error component. The results support three conclusions regarding the sensitivity of efficiency rankings to distributional assumptions. When four standard distributional assumptions are applied to a homoscedastic stochastic frontier model, the efficiency rankings are quite consistent. When those assumptions are applied to a doubly heteroscedastic stochastic frontier model, the efficiency rankings are consistent when proper and sufficient arguments for the variance functions are included in the model. When a more general model, like a variable mean model is estimated, efficiency rankings are quite sensitive to heteroscedasticity correction schemes.

Technical Details

RePEc Handle
repec:taf:applec:45:y:2013:i:17:p:2337-2348
Journal Field
General
Author Count
2
Added to Database
2026-01-24