Fractional regression models for second stage DEA efficiency analyses

Pedro Damião de Sousa Henriques (), Esmeralda Ramalho () and Joaquim Ramalho ()
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Pedro Damião de Sousa Henriques: CEFAGE-UÉ and Department of Economics, University of Évora

CEFAGE-UE Working Papers from University of Evora, CEFAGE-UE (Portugal)

Abstract: Data envelopment analysis (DEA) is commonly used to measure the relative efficiency of decision-making units. Often, in a second stage, a regression model is estimated to relate DEA efficiency scores to exogenous factors. In this paper, we argue that the traditional linear or tobit approaches to second-stage DEA analysis do not constitute a reasonable data-generating process for DEA scores. Under the assumption that DEA scores can be treated as descriptive measures of the relative performance of units in the sample, we show that using fractional regression models are the most natural way of modeling bounded, proportional response variables such as DEA scores. We also propose generalizations of these models and, given that DEA scores take frequently the value of unity, examine the use of two-part models in this framework. Several tests suitable for assessing the specification of each alternative model are also discussed.

Keywords: Second-stage DEA; Fractional data; Specification tests; One outcomes; Two-part models. (search for similar items in EconPapers)
JEL-codes: C12 C13 C25 C51 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2010
New Economics Papers: this item is included in nep-ecm and nep-eff
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Citations: View citations in EconPapers (120)

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Journal Article: Fractional regression models for second stage DEA efficiency analyses (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cfe:wpcefa:2010_01

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