Premium
Comparison of Economic Efficiency Estimation Methods: Parametric and Non–parametric Techniques
Author(s) -
Huang Tai–Hsin,
Wang Mei–Hui
Publication year - 2002
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00320
Subject(s) - economics , econometrics , estimation , parametric statistics , cost efficiency , economies of scale , consistency (knowledge bases) , yield (engineering) , frontier , scale (ratio) , economic efficiency , range (aeronautics) , microeconomics , computer science , statistics , mathematics , engineering , history , materials science , physics , management , archaeology , quantum mechanics , artificial intelligence , metallurgy , operating system , aerospace engineering
We employ a wide range of parametric and non–parametric cost frontiers’ efficiency estimation methods to estimate economic efficiency and economies of scale, using the same panel data of 22 Taiwanese commercial banks over the period 1982–97. According to our empirical implementation, the two methodologies yield similar average efficiency estimates, yet they come to very dissimilar results pertaining to the efficiency rankings, the stability of measured efficiency over time, the consistency between frontier efficiency and conventional performance measures, and the estimates of scale economies. Thus, the choice of an estimation approach can result in very different conclusions and policy implications regarding cost efficiencies and cost economies. These findings suggest that making policy decisions and evaluations relies on multiple techniques and specifications.