Partial frontier efficiency analysis
Harald Tauchmann
Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
and CINCH (Centre of Health Economics Research)
Essen, Germany
[email protected]
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Abstract. Despite their frequent use in applied work, nonparametric approaches to
efficiency analysis—namely, data envelopment analysis and free disposal
hull—have bad reputations among econometricians. This is mainly because
data envelopment analysis and free disposal hull represent deterministic
approaches that are highly sensitive to outliers and measurement errors.
However, so-called partial frontier approaches have recently been developed,
namely, order-m and order-α. These approaches generalize free
disposal hull by allowing for superefficient observations to be located beyond
the estimated production-possibility frontier. Although these methods are
also purely nonparametric, the sensitivity to outliers is substantially
reduced by partial frontier approaches enveloping just a subsample of
observations. In this article, I introduce the new Stata commands
orderm and orderalpha, which implement order-m,
order-α, and free disposal hull efficiency analysis in Stata. The
commands allow for several options, such as statistical inference based on
subsampling bootstrapping.
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Harald Tauchmann
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orderalpha, orderm, nonparametric, efficiency, partial frontier, free disposal hull, outlier-robust, decision-making unit
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