Theory and Practice of Efficiency

THEORY AND PRACTICE OF EFFICIENCY & PRODUCTIVITY MEASUREMENT: NONPARAMETRIC & PARAMETRIC APPROACHES

Summer School for PhDs and postdocs, 2 weeks

Organised by Mansholt Graduate School

WAGENINGEN UNIVERSITY

Week 1: 3-7 July 2006

Parametric Approaches

Subal Kumbhakar

Professor of Economics

State University of New York, Binghamton, USA

Spiro Stefanou

Professor of Agricultural Economics

Pennsylvania State University, USA

Week 2: 10-14 July 2006

Nonparametric Approaches

Lecturers:

Harold Fried

Professor of Economics and

David L. and Beverly B. Yunich Professor of Business Ethics

Union College, USA

Loren Tauer

Professor of Applied Economics and Management

Cornell University, USA

Introduction:

Productivity growth entails changes in scale, efficiency gains and technological change. Innovations are needed to keep pushing the competitive envelope, and efficiency gains are needed to ensure that implemented technologies achieve their potential.

Conventional economic approaches assume that all firms operate rationally and efficiently. This course presents the concepts, models and tools needed to quantify the levels of inefficiency and productivity at a point in time and over time.

Both nonparametric and parametric models addressing efficiency and productivity measurement are addressed. The nonparametric approach uses Data Envelopment Analysis (DEA) to let the data span the frontier to establish the best practice as a basis for measuring inefficiency. The stochastic frontier approach models inefficiency parametrically by specifying a functional form and error structure. These approaches coupled with the microeconomic theory of the firm provide firm-specific measurements of efficiency and best practice role models for improving performance.

This course is designed to bridge the gap between theory and practice. The course is organized into distinct parts which can be taken separately: Nonparametric and Parametric Approaches. Students may enroll for either the Nonparametric or Parametric week, or both weeks. The first week will address nonparametric approach; the second week will address the parametric approach. Students are encouraged to take both weeks, although each week is independent. Theory and method sessions each morning will be followed by an afternoon practicum session. The practicum will include applications of the theory, computer analysis with actual data sets, and interpretations in practice. Applications to various economic sectors will be considered such as agriculture, banking and finance, chain management, health, power generation, and sports. Extensions of these models will be addressed that measure the efficiency of value chains, characterize the dynamic linkages in decision making, and introduce hybrid nonparametric-parametric approaches.

Objective: The course learning objectives address both conceptual and methodological issues.

Intended results: Upon completion of this course, students will understand the underlying theory and become familiar with the software to initiate their own research in efficiency and productivity measurement.

In particular, students will understand the following from either course:

Target Group: the course is set up for PhD students, postdocs and others with background in agricultural economics

Duration: 2 full weeks comprising 2 distinct parts which can be taken separately. Each course will involve daily sessions, with a 3-hour theory session in the morning and a 3-hour practicum session in the afternoon.

Group size: 10-20 participants

Location: Wageningen University (exact location will be announced later)

PREREQUISITES:

Nonparametric Course:

Microeconomic theory at the graduate level such as the treatment in H. Varian, Microeconomic Theory, W.W. Norton. Knowledge of linear programming at the level of Chapter 17 of E. Silberberg and W. Suen, The Structure of Economics: A Mathematical Analysis, McGraw-Hill, 2000.

Parametric Course:

Microeconomic theory at the graduate level such as the treatment in H. Varian, Microeconomic Analysis, W.W. Norton Econometric theory and applications at the graduate level to include topics in Maximum Likelihood Estimation and System Estimation are required and some exposure to panel data econometrics is desirable.

Credits and Examination:

For each of the courses, participants will write a paper applying efficiency and productivity concepts discussed in the course. Details of the composition of the paper will be distributed to participants on the last day of the course. The paper will be due 90 days after the course’s conclusion. Each course load (incl. written assignment) is 4 ECTS.

Course Materials:

Kumbhakar, S. and C.A.K. Lovell, Stochastic Frontier Analysis, Cambridge University Press, 2000. (Parametric Course)

Subhash C. Ray, Data Envelopment Analysis: Theory and Techniques for Economics and Operations Research, Cambridge University Press, 2004 (ISBN-13: 9780521802567 | ISBN-10: 0521802563) (Nonparametric Course)

Participants should make sure they have these books before the course starts (books are not included in participation fee).

Articles and other accompanying materials will be distributed at the course

Software

STATA will be provided. A STATA software training session will be offered on Sunday afternoon, 2 July 2006 (Parametric Course)

DEA Excel Solver by Joe Zhu will be provided. (This is an add-in to MS Excel which uses the Solver Routine in MS Excel) (Nonparametric Course)

TIMETABLE AND OUTLINE (see at the end of the document)

Each course will involve daily sessions, with a 3-hour theory session in the morning and a 3-hour practicum session in the afternoon.

Course fee:

The course fee for each week is €500. For PhD students of Mansholt Graduate School with an approved TSP the course fee is reduced to €250. For those registering for both weeks the course fees are €850 (€450 for MGS PhDs with an approved TSP).

The course fee does not include books. It includes additional training material, coffee / tea, lunches and informal reception.

Registration Procedure:

Register via the website

http://www.sls.wau.nl/mi/mgs/procedures_and_forms/Course_registration_form.htm

Please make sure you provide the most recent contact details so that in case of any changes you will be notified promptly. After your internet registration you will receive a short notification that your name has been registered. At least 2 weeks before the course you will receive a confirmation about the location and the schedule. MGS will also send a bill to your address indicated in the registration form.

Please e-mail to Marcella.haan@wur.nl in case you have not received the second confirmation two weeks before the course.

Cancellations:

The participants can cancel their registration without any fee 4 weeks before the course starts. Cancellation fee of 100% applies if participant cancels the course less than 4 weeks prior to a course. A replacement is always preferred.

Further Information

For further information please contact irina.bezlepkina@wur.nl

For questions about registration please contact

Marcella Haan

Tel +31 317 484126

Marcella.haan@wur.nl

Further information on Mansholt Graduate School and its educational activities: http://www.sls.wau.nl/mi/mgs/courses/index.htm

Useful information for participants from outside Wageningen

For more information about the accommodation at the Wageningen International Centre, go to http://www.wicc-wir.nl

 From Schiphol Airport Amsterdam to Wageningen

At the Airport you can buy a train ticket in the baggage claim area. You will see the sign "Train tickets" near the exit. Then follow the signs 'Nederlandse Spoorwegen' (www.ns.nl) or 'Trains and busses' to the railway station.
Purchase a one-way ticket to station Ede-Wageningen, this will cost € 12,50 and € 0,50 service charge if you buy the ticket at the ticket counter. It is also possible to buy the ticket from the ticket vending machines in the station.
There will be a train leaving every 30 minutes from Schiphol, in the direction of Hilversum from rail track number 1. On the platform, you will see signs hanging from the ceiling with all names of the different stations where the train will stop. Check for the name Duivendrecht and board the train.
The train arrives at Duivendrecht where you will need to transfer to another train, in the direction of Utrecht. Make sure it says "Ede-Wageningen" on the information-board at the rail track, otherwise you will have to transfer again at Utrecht.
The train will leave from rail track number 8 and will arrive at railway station Ede-Wageningen after about 25 minutes.

For Dutch train connections use www.ns.nl, www.thalys.com, www.db.de

 

 Wageningen has no railway station. This lack is fully compensated by accurate means of buses and taxis, as described next.

For information about tickets to some 1400 European destinations and to order them, call Teleservice NS Internationaal: +31 (0)900 92 96 (0.35 euro per minute). You can pay by credit card (EuroCard, MasterCard, VISA or American Express), or by remittance. On-line booking for NS trains (choose station Ede-Wageningen): pre-registration with NS electronic system is required. Prices are mentioned there as well.

From railway station Ede-Wageningen you can take a taxi (approx.15 min.). Taxis leave at the north side of the station. The bus 83 (direction Wageningen) or 86 (direction Arnhem) can be also used .The buses are at the north side of the station. You have to purchase a bus "strippenkaart" at the railroad ticket office (in the bus itself the "strippenkaart" is more expensive). Those coming to the Wageningen International Centre have to get off the bus at the bus stop "Busstation". The WIR hotel is situated next to the bus terminal and the WICC hotel approximately 250 meters to the west.

Parametric Course Schedule and Plan, July 3-10

Nonparametric Course Schedule and Plan, July 10-14