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Technical Efficiency of the Brazilian Municipalities: Correcting Nonparametric Frontier Measurements for Outliers

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  • Maria Sousa
  • Borko Stošić

Abstract

In this paper we estimate the DEA technical efficiency for 4796 Brazilian municipalities, by applying a recently proposed “Jackstrap” method, which combines Bootstrap and Jackknife resampling techniques, to reduce the effect of outliers and possible errors in the data set. We perform calculations to identify and eliminate high leverage municipalities, using different variants of Data Envelopment Analysis (DEA), as well as Free Disposal Hull (FDH). Corroborating previous results, efficiency results for the Brazilian municipalities show a clear relationship between the size of the municipality and its efficiency scores. Indeed, under both DEA variants, smaller cities tend to be less efficient than larger ones hence indicating that the quality of the frontier adjustment improves significantly as the size of the municipality increases. We present arguments that may explain to some extent these findings, such as economies of scale and the excess spending due to revenue from royalties. However, such effects require further, more careful examination. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • Maria Sousa & Borko Stošić, 2005. "Technical Efficiency of the Brazilian Municipalities: Correcting Nonparametric Frontier Measurements for Outliers," Journal of Productivity Analysis, Springer, vol. 24(2), pages 157-181, October.
    • Handle: RePEc:kap:jproda:v:24:y:2005:i:2:p:157-181
    DOI: 10.1007/s11123-005-4702-4
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    References listed on IDEAS

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    1. repec:cor:louvrp:-571 is not listed on IDEAS
    2. Laurens CHERCHYE & Timo KUOSMANEN & Thierry POST, 2000. "New Tools for Dealing with Errors-in-Variables in DEA," Working Papers of Department of Economics, Leuven ces0006, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    3. Vanden Eeckaut, Ph. & Tulkens, H. & Jamar, M-A., 1991. "A Study of Cost-Efficiency and Returns to Scale for 235 Municipalities in Belgium," LIDAM Discussion Papers CORE 1991058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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