Testing the "Separability" Condition in Two-Stage Nonparametric Models of Production
Cinzia Daraio (),
Leopold Simar () and
Paul W. Wilson ()
Additional contact information
Cinzia Daraio: Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy
Paul W. Wilson: Department of Economics and School of Computing, Clemson University, Clemson, SC 29634
No 2015-08, DIAG Technical Reports from Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"
Simar and Wilson (J. Econometrics, 2007) provided a statistical model that can rationalize two-stage estimation of technical efficiency in nonparametric settings. Two-stage estimation has been widely used, but requires a strong assumption: the second-stage environmental variables cannot affect the support of the input and output variables in the first stage. In this paper, we provide a fully nonparametric test of this assumption. The test relies on new central limit theorem (CLT) results for unconditional efficiency estimators developed by Kneip et al. (Econometric Theory, 2015a) and new CLTs for conditional efficiency estimators developed in this paper. The test can be implemented relying on either asymptotic normality of the test statistics or using bootstrap methods to obtain critical values. Our simulation results indicate that our tests perform well both in terms of size and power. We present a real-world empirical example by updating the analysis performed by Aly et al. (R. E. Stat., 1990) on U.S. commercial banks; our tests easily reject the assumption required for two-stage estimation, calling into question results that appear in hundreds of papers that have been published in recent years.
Keywords: technical efficiency; conditional efficiency; two-stage estimation; bootstrap; separability; data envelopment analysis (DEA); free-disposal hull (FDH). (search for similar items in EconPapers)
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 (3) Track citations by RSS feed
Downloads: (external link)
http://www.dis.uniroma1.it/~bibdis/RePEc/aeg/report/2015-08.pdf First version, 2015 (application/pdf)
Working Paper: Testing the "separability" condition in two-stage nonparametric models of production (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aeg:report:2015-08
Access Statistics for this paper
More papers in DIAG Technical Reports from Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" Contact information at EDIRC.
Series data maintained by Antonietta Angelica Zucconi ().