Statistical evaluation of Data Envelopment Analysis versus COLS Cobb–Douglas benchmarking models for the 2011 Brazilian tariff revision

Marcelo Azevedo Costa, Ana Lúcia Miranda Lopes and Giordano Bruno Braz de Pinho Matos

Socio-Economic Planning Sciences, 2015, vol. 49, issue C, 47-60

Abstract: In 2011, the Brazilian Electricity Regulator (ANEEL) implemented a benchmarking model to evaluate the operational efficiency of power distribution utilities. The model is based on two benchmarking methods: Data Envelopment Analysis (DEA) and Corrected Ordinary Least Squares (COLS) with a Cobb Douglas production function. Although the estimated scores are highly correlated, differences between the scores are as high as 41%. For some companies differences between the efficiency scores result in substantial reduction in regulatory operational costs. We provide a detailed statistical comparison which indicates that the COLS Cobb Douglas model has major deficiencies in terms of estimating efficiency scores.

Keywords: Benchmarking; Corrected Ordinary Least Squares; Cobb–Douglas production function; Data Envelopment Analysis (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceps:v:49:y:2015:i:c:p:47-60

DOI: 10.1016/j.seps.2014.11.001

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