Impact of liberalization on efficiency and productivity of sugar industry in Kenya

Purpose – The data used in this study is for the period 1980-2000. Almost midway through this period (in 1992), the Kenyan government liberalized the sugar industry and the role of the market increased, while the government's role with respect to control of prices, imports and other aspects in the sector declined. This exposed the local sugar manufacturers to external competition from other sugar producers, especially from the COMESA region. This study aims to find whether there were any changes in efficiency of production between the two periods (pre and post-liberalization). Design/methodology/approach – The study utilized two methodologies to efficiency estimation: data envelopment analysis (DEA) and the stochastic frontier. DEA uses mathematical programming techniques and does not impose any functional form on the data. However, it attributes all deviation from the mean function to inefficiencies. The stochastic frontier utilizes econometric techniques. Findings – The test for structural differences in the two periods does not show any statistically significant differences between the two periods. However, both methodologies show a decline in efficiency levels from 1992, with the lowest period experienced in 1998. From then on, efficiency levels began to increase. Originality/value – To the best of the authors' knowledge, this is the first paper to use both methodologies in the sugar industry in Kenya. It is shown that in industries where the noise (error) term is minimal (such as manufacturing), the DEA and stochastic frontier give similar results.

Determining the contribution of technical change, efficiency change and scale change to productivity growth in the privatized English and Welsh water and sewerage industry:1985-2000

The water and sewerage industry of England and Wales was privatized in 1989 and subjected to a new regime of environmental, water quality and RPI+K price cap regulation. This paper estimates a quality-adjusted input distance function, with stochastic frontier techniques in order to estimate productivity growth rates for the period 1985-2000. Productivity is decomposed so as to account for the impact of technical change, efficiency change, and scale change. Compared with earlier studies by Saal and Parker [(2000) Managerial Decision Econ 21(6):253-268, (2001) J Regul Econ 20(1): 61-90], these estimates allow a more careful consideration of how and whether privatization and the new regulatory regime affected productivity growth in the industry. Strikingly, they suggest that while technical change improved after privatization, productivity growth did not improve, and this was attributable to efficiency losses as firms appear to have struggled to keep up with technical advances after privatization. Moreover, the results also suggest that the excessive scale of the WaSCs contributed negatively to productivity growth. © 2007 Springer Science+Business Media, LLC.

The determinants of firms' performance:can finance constraints improve technical efficiency?

This paper analyses the mechanisms through which binding finance constraints can induce debt-constrained firms to improve technical efficiency to guarantee positive profits. This hypothesis is tested on a sample of firms belonging to the Italian manufacturing. Technical efficiency scores are computed by estimating parametric production frontiers using the one stage approach as in Battese and Coelli [Battese, G., Coelli, T., 1995. A model for technical efficiency effects in a stochastic frontier production function for panel data. Empirical Economics 20, 325-332]. The results support the hypothesis that a restriction in the availability of financial resources can affect positively efficiency. © 2004 Elsevier B.V. All rights reserved.

An analysis of costs in institutions of higher education in England

Cost functions are estimated, using random effects and stochastic frontier methods, for English higher education institutions. The article advances on existing literature by employing finer disaggregation by subject, institution type and location, and by introducing consideration of quality effects. Estimates are provided of average incremental costs attached to each output type, and of returns to scale and scope. Implications for the policy of expansion of higher education are discussed.

The impact of ICT on productivity of airline industry

Airline industry is at the forefront of many technological developments and is often a pioneer in adopting such innovations in a large scale. It needs to improve its efficiency as the current trends for input prices and competitive pressures show that any airline will face increasingly challenging market conditions. This paper has focused on the relationship between ICT investments and efficiency in the airline industry and employed a two-stage analytical investigation, DEA, SFA and the Tobit regression model. In this study, we first estimate the productivity of the airline industry using a balanced panel of 17 airlines over the period 1999–2004 by the Data Envelop Analysis (DEA) and the Stochastic Frontier Analysis (SFA) methods. We then evaluate the impacts of the determinants of productivity in the industry concentrating on ICT. The results suggest that regardless of all the negative shocks to the airline industry during the sample period, ICT had a positive effect on productivity during 1999-2004.

The impact of Islamic banking on the cost efficiency and productivity change of Malaysian commercial banks

This study employs stochastic frontier analysis to analyze Malaysian commercial banks during 1996-2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in costs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalised Malmquist productivity index. On average, Malaysian banks experience moderate scale economies and annual productivity change of 2.68 percent, with the latter driven primarily by technical change, which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. However, our productivity estimates indicate that full-fledged Islamic banks have overcome some of these cost disadvantages with rapid technical change, although this is not the case for conventional banks operating Islamic windows. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had a short-term cost-reducing effect in 1998, the crisis triggered a more lasting negative impact by increasing the volume of non-performing loans.

Evaluating productive efficiency:comparative study of commercial banks in Gulf countries

Financial institutes are an integral part of any modern economy. In the 1970s and 1980s, Gulf Cooperation Council (GCC) countries made significant progress in financial deepening and in building a modern financial infrastructure. This study aims to evaluate the performance (efficiency) of financial institutes (banking sector) in GCC countries. Since, the selected variables include negative data for some banks and positive for others, and the available evaluation methods are not helpful in this case, so we developed a Semi Oriented Radial Model to perform this evaluation. Furthermore, since the SORM evaluation result provides a limited information for any decision maker (bankers, investors, etc...), we proposed a second stage analysis using classification and regression (C&R) method to get further results combining SORM results with other environmental data (Financial, economical and political) to set rules for the efficient banks, hence, the results will be useful for bankers in order to improve their bank performance and to the investors, maximize their returns. Mainly there are two approaches to evaluate the performance of Decision Making Units (DMUs), under each of them there are different methods with different assumptions. Parametric approach is based on the econometric regression theory and nonparametric approach is based on a mathematical linear programming theory. Under the nonparametric approaches, there are two methods: Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH). While there are three methods under the parametric approach: Stochastic Frontier Analysis (SFA); Thick Frontier Analysis (TFA) and Distribution-Free Analysis (DFA). The result shows that DEA and SFA are the most applicable methods in banking sector, but DEA is seem to be most popular between researchers. However DEA as SFA still facing many challenges, one of these challenges is how to deal with negative data, since it requires the assumption that all the input and output values are non-negative, while in many applications negative outputs could appear e.g. losses in contrast with profit. Although there are few developed Models under DEA to deal with negative data but we believe that each of them has it is own limitations, therefore we developed a Semi-Oriented-Radial-Model (SORM) that could handle the negativity issue in DEA. The application result using SORM shows that the overall performance of GCC banking is relatively high (85.6%). Although, the efficiency score is fluctuated over the study period (1998-2007) due to the second Gulf War and to the international financial crisis, but still higher than the efficiency score of their counterpart in other countries. Banks operating in Saudi Arabia seem to be the highest efficient banks followed by UAE, Omani and Bahraini banks, while banks operating in Qatar and Kuwait seem to be the lowest efficient banks; this is because these two countries are the most affected country in the second Gulf War. Also, the result shows that there is no statistical relationship between the operating style (Islamic or Conventional) and bank efficiency. Even though there is no statistical differences due to the operational style, but Islamic bank seem to be more efficient than the Conventional bank, since on average their efficiency score is 86.33% compare to 85.38% for Conventional banks. Furthermore, the Islamic banks seem to be more affected by the political crisis (second Gulf War), whereas Conventional banks seem to be more affected by the financial crisis.

The impact of Islamic banking on the cost efficiency and productivity change of Malaysian commercial banks

This study employs Stochastic Frontier Analysis (SFA) to analyse Malaysian commercial banks during 1996–2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in costs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalized Malmquist productivity index. On average, Malaysian banks experience moderate scale economies and annual productivity change of 2.68%, with the latter driven primarily by Technical Change (TC), which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. However, our productivity estimates indicate that full-fledged Islamic banks have overcome some of these cost disadvantages with rapid TC, although this is not the case for conventional banks operating Islamic windows. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had a short-term costreducing effect in 1998, the crisis triggered a long-lasting negative impact by increasing the volume of nonperforming loans.

The efficiency and productivity of Malaysian banks:an output distance function approach

This study employs stochastic frontier analysis to analyze Malaysian commercial banks during 1996-2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in outputs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalised Malmquist productivity index. On average, Malaysian banks experience mild decreasing return to scale and annual productivity change of 2.37 percent, with the latter driven primarily by technical change, which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. In addition, our productivity estimates indicate that the potential for full-fledged Islamic banks and conventional banks with Islamic banking operations to overcome the output disadvantages associated with Islamic banking are relatively limited. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had an interim output-increasing effect in 1998, the crisis prompted a continuing negative impact on the output performance by increasing the volume of non-performing loans.

Derivation of marginal effects of determinants of technical inefficiency

In efficiency studies using the stochastic frontier approach, the main focus is to explain inefficiency in terms of some exogenous variables and computation of marginal effects of each of these determinants. Although inefficiency is estimated by its mean conditional on the composed error term (the Jondrow et al., 1982 estimator), the marginal effects are computed from the unconditional mean of inefficiency (Wang, 2002). In this paper we derive the marginal effects based on the Jondrow et al. estimator and use the bootstrap method to compute confidence intervals of the marginal effects.

Heterogenitás és technikai hatékonyság - a magyar specializált szántóföldi növénytermesztő üzemek esete = Heterogeneity and technical efficiency - the case of Hungary's specialized arable crop production units

A cikkben paneladatok segítségével a magyar gabonatermesztő üzemek 2001 és 2009 közötti technikai hatékonyságát vizsgáljuk. A technikai hatékonyság szintjének becslésére egy hagyományos sztochasztikus határok modell (SFA) mellett a látens csoportok modelljét (LCM) használjuk, amely figyelembe veszi a technológiai különbségeket is. Eredményeink arra utalnak, hogy a technológiai heterogenitás fontos lehet egy olyan ágazatban is, mint a szántóföldi növénytermesztés, ahol viszonylag homogén technológiát alkalmaznak. A hagyományos, azonos technológiát feltételező és a látens osztályok modelljeinek összehasonlítása azt mutatja, hogy a gabonatermesztő üzemek technikai hatékonyságát a hagyományos modellek alábecsülhetik. _____ The article sets out to analyse the technical efficiency of Hungarian crop farms between 2001 and 2009, using panel data and employing both standard stochastic frontier analysis and the latent class model (LCM) to estimate technical efficiency. The findings suggest that technological heterogeneity plays an important role in the crop sector, though it is traditionally assumed to employ homogenous technology. A comparison of standard SFA models that assumes the technology is common to all farms and LCM estimates highlights the way the efficiency of crop farms can be underestimated using traditional SFA models.

Three essays on hospital efficiency

This dissertation analyzes hospital efficiency using various econometric techniques. The first essay provides additional and recent evidence to the presence of contract management behavior in the U.S. hospital industry. Unlike previous studies, which focus on either an input-demand equation or the cost function of the firm, this paper estimates the two jointly using a system of nonlinear equations. Moreover, it addresses the longitudinal problem of institutions adopting contract management in different years, by creating a matched control group of non-adopters with the same longitudinal distribution as the group under study. The estimation procedure then finds that labor, and not capital, is the preferred input in U.S. hospitals regardless of managerial contract status. With institutions that adopt contract management benefiting from lower labor inefficiencies than the simulated non-contract adopters. These results suggest that while there is a propensity for expense preference behavior towards the labor input, contract managed firms are able to introduce efficiencies over conventional, owner controlled, firms. Using data for the years 1998 through 2007, the second essay investigates the production technology and cost efficiency faced by Florida hospitals. A stochastic frontier multiproduct cost function is estimated in order to test for economies of scale, economies of scope, and relative cost efficiencies. The results suggest that small-sized hospitals experience economies of scale, while large and medium sized institutions do not. The empirical findings show that Florida hospitals enjoy significant scope economies, regardless of size. Lastly, the evidence suggests that there is a link between hospital size and relative cost efficiency. The results of the study imply that state policy makers should be focused on increasing hospital scale for smaller institutions while facilitating the expansion of multiproduct production for larger hospitals. The third and final essay employs a two staged approach in analyzing the efficiency of hospitals in the state of Florida. In the first stage, the Banker, Charnes, and Cooper model of Data Envelopment Analysis is employed in order to derive overall technical efficiency scores for each non-specialty hospital in the state. Additionally, input slacks are calculated and reported in order to identify the factors of production that each hospital may be over utilizing. In the second stage, we employ a Tobit regression model in order to analyze the effects a number of structural, managerial, and environmental factors may have on a hospital’s efficiency. The results indicated that most non-specialty hospitals in the state are operating away from the efficient production frontier. The results also indicate that the structural make up, managerial choices, and level of competition Florida hospitals face have an impact on their overall technical efficiency.

Benchmarking e regulação do setor de distribuição de energia elétrica nacional: proposta para avaliação dos custos operacionais eficientes

In Brazil, the National Agency of Electric Energy (ANEEL) represents the energy regulator. The rates review have been one of its main tasks, which establish a pricing practice at a level to cover the efficient operating costs and also the appropriate return of the distributors investments. The changes in the procedures to redefine the efficient costs and the several studies on the methodologies employed to regulate this segment denote the challenge faced by regulators about the best methodological strategy to be employed. In this context, this research aims to propose a benchmarking evaluation applied to the national regulation system in the establishment of efficient operating costs of electricity distribution utilities. The model is formulated to promote the electricity market development, partnering with government policies ant to society benefit. To conduct this research, an integration of Data Envelopment Analysis (DEA) with the Stochastic Frontier Analysis (SFA) is adopted in a three stages procedure to correct the efficiency in terms of environmental effects: (i) evaluation by means of DEA to measure operating costs slacks of the utilities, in which environmental variables are omitted; (ii) The slacks calculated in the first stage are regressed on a set of environmental variables by means of SFA and operating costs are adjusted to account the environmental impact and statistical noise effects; and, (iii) reassess the performance of the electric power distribution utilities by means of DEA. Based on this methodology it is possible to obtain a performance evaluation exclusively expressed in terms of management efficiency, in which the operating environment and statistical noise effects are controlled.

Gastos públicos em educação municipal: uma análise da eficiência-custo na gestão dos recursos no ensino fundamental no estado do Rio Grande do Norte

This study evaluates the cost effectiveness of municipalities in the state of Rio Grande do Norte in the execution of spending in basic education carried out in 2011, as well as analyze the determinants of the inefficiency of the same. For this, we used two methodological approaches (i) stochastic frontier cost, and (ii) analyze data envelopment (DEA), which allows to identify the efficient frontier of the municipalities analyzed non-parametrically. Results show that municipalities under review achieved low efficiency rates in the stochastic frontier cost, while the DEA method they achieved higher rates where nineteen among them reached full efficiency. The results suggest that a significant portion of the Potiguar municipalities should review its administrative practices, especially the means of allocation of resources. In regard to determining the efficiency observed distinct results by the two methods.

Agricultural microcredit and technical efficiency: The case of smallholder rice farmers in Northern Ghana

In the current study, we compared technical efficiency of smallholder rice farmers with and without credit in northern Ghana using data from a farm household survey. We fitted a stochastic frontier production function to input and output data to measure technical efficiency. We addressed self-selection into credit participation using propensity score matching and found that the mean efficiency did not differ between credit users and non-users. Credit-participating households had an efficiency of 63.0 percent compared to 61.7 percent for non-participants. The results indicate significant inefficiencies in production and thus a high scope for improving farmers’ technical efficiency through better use of available resources at the current level of technology. Apart from labour and capital, all the conventional farm inputs had a significant effect on rice production. The determinants of efficiency included the respondent’s age, sex, educational status, distance to the nearest market, herd ownership, access to irrigation and specialisation in rice production. From a policy perspective, we recommend that the credit should be channelled to farmers who demonstrate the need for it and show the commitment to improve their production through external financing. Such a screening mechanism will ensure that the credit goes to the right farmers who need it to improve their technical efficiency.