Do we estimate an input or an output distance function? An application of the mixture approach to European railways

Authors: Kumbhakar, Subal; Orea, Luis; Rodríguez-Álvarez, Ana; Tsionas, Efthymios

Source: Journal of Productivity Analysis, Volume 27, Number 2, April 2007 , pp. 87-100(14)

Publisher: Springer

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Abstract:

In this paper, we estimate parametric input and output distance functions and discuss how to estimate a mixture/latent class model (LCM) involving the output and input distance functions in the context of multi-input and multi-output production technology. The proposed technique is applied to a panel data on European Railways (1971-1994). This model allows us to identify determinants of the efficiency orientation, thereby providing useful information that can help researchers to choose between the input and the output-oriented approaches. In addition, we develop cross-indices that can be used to compute input (output) technical inefficiency from the estimates of output (input) distance function.

Keywords: Distance functions; Technical efficiency orientation; Latent class models; D21·D24·L92

Document Type: Research article

DOI: http://dx.doi.org/10.1007/s11123-006-0031-5

Affiliations: 1: Email: kkar@binghamton.edu

Publication date: 2007-04-01