Methodology

This chapter contains an overview of the methods used in the academic literature and regulatory practice to assess efficiency and productivity performance, both between firms and over time. The chapter starts by explaining why simple comparisons of unit costs or partial productivity measures may not be sufficient, before discussing the available non-parametric approaches (such as data envelopment analysis and bootstrapping), as well as parametric frontier techniques. Ultimately, the choice of technique will depend on a number of factors, including the number of data points, availability of cost driver data, model performance, economic theory and practical considerations.