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    Rights statement: This is the author’s version of a work that was accepted for publication in European Journal of Operational Research. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Journal of Operational Research, vol, pages, 2022 DOI: 10.1016/j.ejor.2022.05.004

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    Embargo ends: 10/05/24

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Performance estimation when the distribution of inefficiency is unknown

Research output: Contribution to Journal/MagazineJournal articlepeer-review

E-pub ahead of print
<mark>Journal publication date</mark>10/05/2022
<mark>Journal</mark>European Journal of Operational Research
Publication StatusE-pub ahead of print
Early online date10/05/22
<mark>Original language</mark>English

Abstract

We show how to compute inefficiency or performance scores when the distribution of the one-sided error component in Stochastic Frontier Models (SFMs) is unknown; and we do the same with Data Envelopment Analysis (DEA). Our procedure, which is based on the Fast Fourier Transform (FFT), utilizes the empirical characteristic function of the residuals in SFMs or efficiency scores in DEA. The new techniques perform well in Monte Carlo experiments and deliver reasonable results in an empirical application to large U.S. banks. In both cases, deconvolution of DEA scores with the FFT brings the results much closer to the inefficiency estimates from SFM.

Bibliographic note

This is the author’s version of a work that was accepted for publication in European Journal of Operational Research. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Journal of Operational Research, vol, pages, 2022 DOI: 10.1016/j.ejor.2022.05.004