Nonparametric Approaches

This chapter focuses on the nonparametric data envelopment analysis (DEA) framework of structural linear programming models underlying the estimation of efficiency. The nonparametric approach to measuring technical and cost inefficiency has been adopted in the examples in earlier chapters. Chapter 3 introduced the notions of inner- and outer-bound technologies. The inner-bound technology representation has dominated the nonparametric empirical applications in the literature on measuring efficiency and productivity. However, as this chapter shows, the outer-bound representation of the technology presents a viable alternative to measuring technical and cost efficiency as well. The chapter also develops an application to farm-level panel data.