Community Research and Development Information Service - CORDIS

Methodology review and development: Stochastic Production Frontiers and Data Envelopment Analysis

The methodological report (Pascoe, S. and Mardle, S. (Eds) 2003 'Efficiency analysis in EU fisheries: Stochastic Production Functions and Data Envelopment Analysis', CEMARE Report 60, CEMARE, University of Portsmouth, UK) includes a detailed overview of the theory underlying the estimation of stochastic production frontiers, comparisons of stochastic production frontiers with production functions, application of stochastic production frontiers in other industries, applications to the fishing industry, measurement of technical efficiency and inefficiency models, estimation and interpretation of scale elasticity and elasticity of substitution, the theory underlying DEA and applications to the fishing and other industries, and development of stochastic DEA models. The best practice for the alternative approaches is presented, along with a step-by-step guide to the use of the preferred software.

As well as achieving the main objectives of the project, a number of innovations were developed as part of the project that was not originally anticipated. These included a method for estimating composite stock indexes using DEA and a method for separating changes in stock from pure technological change. These methods proved necessary for the estimation of several models for fisheries with limited stock information.

The development of multi-output stochastic frontier models was also not originally anticipated, but was successfully applied to several of the fisheries examined. The models provided useful information not only on the level and distribution of efficiency in the fisheries, but also the degree to which fishers can target individual species within the catch. Groups of species can be identified with limited substitutability. This information is important when attempting to set compatible quotas.

A number of different econometric software packages were examined. While several software packages can estimate stochastic production frontiers, only LIMDEP and FRONTIER can be used to estimate individual efficiency scores. Only FRONTIER is able to estimate inefficiency models directly and as such was the preferred software for the econometric analysis in the study.

The existing literature in the Data Envelopment Analysis (DEA) field was reviewed in order to examine the different software for solving DEA models, and which software was most commonly used. While a wide range of DEA software was available, only a few products allow the researcher to add or exchange different constraints to the model. The GAMS software was found to be the most adaptable, as it allows you to build different DEA models formulated by the researcher. GAMS is not a specific DEA software, but is a generalised optimisation software.

Methodological work was also undertaken in terms of software development. A windows based version of the econometric software used for the estimation of technical efficiency was developed for use by the partners (and the broader research community). The advantage of the revised software is that many of the standard tests and transformations are automated, simplifying its use. The revised software will make efficiency estimation easier for other research teams in Europe involved with fisheries or other industries.

Contact

Sean PASCOE, (Professor in Natural Resource Economics)
Tel.: +44-2392844242
Fax: +44-2392844614
E-mail
Record Number: 30337 / Last updated on: 2003-11-21
Information source: e-TIP
Collaboration sought: Available for consultancy, Further research or development support, Information exchange/Training