Sensitivity of directional technical inefficiency measures to the choice of the direction vector: a simulation study

Pedro Macedo (pmacedo@ua.pt) and Elvira Silva (esilva@fep.up.pt)
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Pedro Macedo: CIDMA - Center for Research & Development in Mathematics and Applications, University of Aveiro
Elvira Silva: Faculty of Economics & Center for Economics and Finance at University of Porto (CEF.UP)

Economics Bulletin, 2017, vol. 37, issue 1, 52-62

Abstract: The purpose of this note is to provide new insights on the sensitivity of technical inefficiency scores, estimated using a directional distance function with small samples and the presence of outliers, to the choice of the direction vector. A simulation study with a geometric illustration is conducted considering several direction vectors. To the best of authors' knowledge, this is the first simulation work comparing 16 direction vectors, some of which are often employed in empirical studies. The four directional vectors that consistently provide the best results are identified an

Keywords: Directional distance functions; Efficiency analysis; Productivity (search for similar items in EconPapers)
JEL-codes: C6 D2 (search for similar items in EconPapers)
Date: 2017-01-13
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