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

Author

Listed:
  • 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))

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

Suggested Citation

  • Pedro Macedo & Elvira Silva, 2017. "Sensitivity of directional technical inefficiency measures to the choice of the direction vector: a simulation study," Economics Bulletin, AccessEcon, vol. 37(1), pages 52-62.
    • Handle: RePEc:ebl:ecbull:eb-16-00504
    as

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    More about this item

    Keywords

    Directional distance functions; Efficiency analysis; Productivity;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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