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Journal of Productivity Analysis

, Volume 41, Issue 1, pp 85–109 | Cite as

The StoNED age: the departure into a new era of efficiency analysis? A monte carlo comparison of StoNED and the “oldies” (SFA and DEA)

  • Mark Andor
  • Frederik Hesse
Article

Abstract

Based on the seminal paper of Farrell (J R Stat Soc Ser A (General) 120(3):253–290, 1957), researchers have developed several methods for measuring efficiency. Nowadays, the most prominent representatives are nonparametric data envelopment analysis (DEA) and parametric stochastic frontier analysis (SFA), both introduced in the late 1970s. Researchers have been attempting to develop a method which combines the virtues—both nonparametric and stochastic—of these “oldies”. The recently introduced Stochastic non-smooth envelopment of data (StoNED) by Kuosmanen and Kortelainen (J Prod Anal 38(1):11–28, 2012) is such a promising method. This paper compares the StoNED method with the two “oldies” DEA and SFA and extends the initial Monte Carlo simulation of Kuosmanen and Kortelainen (J Prod Anal 38(1):11–28, 2012) in several directions. We show, among others, that, in scenarios without noise, the rivalry is still between the “oldies”, while in noisy scenarios, the nonparametric StoNED PL now constitutes a promising alternative to the SFA ML.

Keywords

Efficiency Stochastic non-smooth envelopment of data (StoNED) Data envelopment analysis (DEA) Stochastic frontier analysis (SFA) Monte carlo simulation 

JEL Classification

C14 C52 D24 L59 

Notes

Acknowledgments

We are deeply indebted to the participants of the 8th Asia-Pacific Productivity Conference (APPC) in Bangkok, Thailand, the 4th Workshop on Efficiency and Productivity Analysis (HAWEPA) in Halle, Germany, the 12th European Workshop on Efficiency and Productivity Analysis (EWEPA) in Verona, Italy, and the 11th IAEE European Conference in Vilnius, Lithuania, for providing valuable comments that have led to a considerable improvement of earlier versions of this paper. Furthermore, we would like to thank Brian Bloch, Finn Førsund, William Greene, Arne und Geraldine Henningsen, Uwe Jensen, Choonjoo Lee, Colin Vance, the editors and two anonymous referees for their helpful comments and suggestions. The authors are responsible for all errors and omissions.

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Division of Environment and ResourcesRheinisch-Westfälisches Institut für WirtschaftsforschungEssenGermany
  2. 2.Finance Center MünsterWestfälische Wilhelms-Universität MünsterMunsterGermany

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