Blaming the exogenous environment? Conditional efficiency estimation with continuous and discrete exogenous variables

Kristof De Witte and Mika Kortelainen

MPRA Paper from University Library of Munich, Germany

Abstract: This paper proposes a fully nonparametric framework to estimate relative efficiency of entities while accounting for a mixed set of continuous and discrete (both ordered and unordered) exogenous variables. Using robust partial frontier techniques, the probabilistic and conditional characterization of the production process, as well as insights from the recent developments in nonparametric econometrics, we present a generalized approach for conditional efficiency measurement. To do so, we utilize a tailored mixed kernel function with a data-driven bandwidth selection. So far only descriptive analysis for studying the effect of heterogeneity in conditional efficiency estimation has been suggested. We show how to use and interpret nonparametric bootstrap-based significance tests in a generalized conditional efficiency framework. This allows us to study statistical significance of continuous and discrete exogenous variables on production process. The proposed approach is illustrated using simulated examples as well as a sample of British pupils from the OECD Pisa data set. The results of the empirical application show that several exogenous discrete factors have a statistically significant effect on the educational process.

Keywords: Nonparametric estimation; Conditional efficiency measures; Exogenous factors; Generalized kernel function; Education (search for similar items in EconPapers)
JEL-codes: C14 C25 I21 (search for similar items in EconPapers)
Date: 2009-03-04
New Economics Papers: this item is included in nep-ecm and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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