Metafrontier Framework Research Articles

Technical efficiency and technology gap in Ghana’s cocoa industry: accounting for farm heterogeneity

ABSTRACTThis study employs a stochastic metafrontier framework to examine the performance of smallholder cocoa farmers using cross-country survey from Ghana. The results indicate that the output of farmers from all the regions lags behind their potential with the mean technical efficiency of 0.65, 0.76, 0.60 and 0.74 for Western, Brong-Ahafo, Ashanti and Eastern regions, respectively. Each region faces a technology gap when their performances are compared with the technology available in the industry as a whole. The study identified sources of farmers’ technical inefficiency emanating from a combined effects of socioeconomic and farm-specific factors although effects of some variables were not significant. However, farmers in all the regions have the potential to overcome technological constraints and achieve the highest attainable productivity levels. It is, therefore, important that Ghana cocoa board strengthened its strategies to the latter to improve farmers’ technical and managerial skills on the efficient use of resources.

Estimating risk efficiency in Middle East banks before and after the crisis: A metafrontier framework

The aim of this study is three-fold. Firstly, it attempts to analyse the effect of risk on Middle East banks' efficiency levels before and after the recent financial crisis. Secondly, it seeks to determine the influence of bank size taking into consideration the possible inefficiency originated to risk abatement cost. Thirdly, it investigates the possible effect of oil price shocks on banks' performance. To examine these issues we introduce a risk efficiency index based on an output orientated directional distance function with weak and strong disposability assumptions. The methodology has been applied on a panel of Middle East banks spanning the period 1998–2014.The empirical findings suggest that on average small banks are more efficient and their size has less negative impact on their technical efficiency and risk management. On the other hand, large banks' risk management is found to be more flexible during the financial crisis. Moreover, banks with higher fixed assets are associated with more costly disposals of non-performing loans justifying the rejection of a positive relation between bank size and technical efficiency. Finally, oil price shocks play a significant role.

Energy efficiency, productive performance and heterogeneous competitiveness regimes. Does the dichotomy matter?

We investigate the links between energy efficiency and productive performance by relaxing the technological isolation assumption among country economies at a global scale. More precisely, we partition the universal technology giving rise to heterogeneous competitiveness regimes to investigate the relationship between energy efficiency, productive performance and spillover effects by adopting a metafrontier framework. Considering seventy seven countries from 2002 through 2011, we employ data on the global competitiveness index to cluster the examined countries into two technological groups, the competitive and less competitive one. The performance of the country economies is evaluated using the Data Envelopment Analysis and the corresponding slack-based energy efficiency scores. Endogeneity between measures of performance stimulates the use of a control function approach employing fractional probit models with endogenous regressor. Although there is not enough evidence to justify the endogenous relationship between the energy efficiency and productive performance, results indicate that the two performance measures appear to be detached, for the competitive cluster. We find that dichotomy matters, as the less competitive country economies capitalize spillover effects to improve energy efficiency, but this is not the case for the countries clustered in the competitive group. In addition, a U-shaped relationship between energy efficiency and productive performance is documented, highlighting that performance measures are intrinsically linked.

Assessment of regional productive performance of European health systems under a metatechnology framework

Within last seventy years, healthcare spending in Europe has grown faster than national income. However, this does not always translate into good health indicators, suggesting a problem of efficiency in different European health systems. This paper analyzes the efficiency of such systems for 185 European regions in 17 countries by grouping them into three clusters according to their institutional setting: regulation, funding and service provision. We investigate their productive performance by adopting a metafrontier framework for exploring the role of technological spillovers. Our findings suggest that the three European health systems show similar efficiency performance; the best performers are regions that have adopted social healthcare insurance; kernel analysis indicates that there is convergence toward a single club in each frontier. Finally, we find a dramatic change in the convergence process after the nancial crisis, with European regions converging toward different groups with different levels of efficiency.

Evaluating the Environmental-Technology Gaps of Rice Farms in Distinct Agro-Ecological Zones of Ghana

Rice (Oryza sativa) is an important food staple and a cash crop, which is cultivated in all the ten regions of Ghana under varying agro-ecological conditions. These conditions also reflect the production technologies used and the total farm output. In an attempt to determine the potential sources of production shortfalls on rice farms in Ghana, this paper estimates the production efficiency and the environmental-technology gaps of rice-producing households in the forest-savannah transition and guinea savannah agro-ecological zones of Ghana. The paper adopts the stochastic metafrontier framework, which permits technology-related inefficiency effects to be extricated from managerial inefficiency effects for appropriate policy formulation. In contrast to past studies, the empirical findings reveal that farms in the two agro-ecological zones adopt heterogeneous production technologies due to differences in their production environments. This is indicated by the estimated mean environmental-technology gap ratios of 0.95 and 0.50, and mean metafrontier technical efficiencies of 0.56 and 0.42 for farms in the forest-savannah transition and guinea savannah zones, respectively. These findings call for agricultural policy formulation in Ghana to be targeted at the prevailing environmental conditions of the various agro-ecological zones rather than being all-inclusive in addressing the extant inefficiencies in the rice production systems of Ghana.

Optimal path for controlling pollution emissions in the Chinese electric power industry considering technological heterogeneity.

The electric power industry is not only an important part in the Chinese economic system but also the key industry with the highest emissions of air pollutants in China. This paper aims to control the pollution emissions of the Chinese electric power industry and enhance its electric-generation capacity though pollution-emission allocation patterns and inefficiency elimination. The data envelopment analysis centralized allocation model (DEA-CA) under metafrontier framework is adopted to distribute pollution emissions and electric-generation capacity considering technological heterogeneity at regional and national levels. The empirical result shows that the emission reduction responsibility is directly proportional to regional power generation performance. The metafrontier framework allocates emission permits to combine the national and regional, which makes the adjustment of each province more reasonable. At last, the relationship between the aggregate optimal electricity capacity and the pollution emission control coefficient is shown to follow an inverted U-shape curve, which implies that a modest emission control policy might be more appropriate for the electric power industry to achieve the joint optimizing goal of electricity generation enhancement and pollution emission control.

A Meta-frontier method of decomposing long-term construction productivity components and technological gaps at the firm level: evidence from Malaysia

There is a need for a better approach to measure construction productivity rigorously, multilaterally, longitudinally and decomposed into its components. In response, this paper offers a robust approach to analysing construction productivity at the firm level that has been lacking in the industry to date, by measuring the Total Factor Productivity (TFP) of 37 public-listed Malaysian construction firms over 14 years (2003–2016), based on the Färe-Primont index. In comparing different groups of building, civil and specialist construction firms, this is the first application of a meta-frontier framework to capture the technological gaps involved. Based on the construction firms’ financial data, it is found that TFP improvement generally occurs due to Technical Efficiency (TE) and Scale-Mix Efficiency (SME) (largely scope economies), and significant technological gaps exist among different groups. Moreover, the industry suffered a decline in technologically related production environment over the period – prompting the conclusion that long-term policy engagement should focus on technological improvements. The paper provides a robust approach to analysing construction productivity at the firm level that also can be used for accessing productivity components and technological gaps in construction and other industries.

Farming systems and productivity gaps: Opportunities for improving smallholder performance in the Forest-Savannah transition zone of Ghana

This paper examines the productivity of diversified farming systems in the Forest-Savannah Transition zone of Ghana. Cross sectional data from 568 smallholder farmers and a metafrontier framework are used to investigate the opportunities for improving the performance of three types of farming systems: crop; livestock; and integrated crop-livestock. The results show that increasing farmers’ access to labour and capital improves the productivity of each of the three farming systems, whereas access to land increases the productivity of the livestock and integrated crop-livestock farming systems. The latter system is more productive because of its greater diversification. There are opportunities for improving productivity through enhancing farmers’ access to market information and promoting output diversification. Furthermore, policies designed to encourage the adoption of integrated crop-livestock farming systems as a way to enhance productivity, to spread production and market risk, and to promote more stable farm incomes are warranted.

Productivity, technical efficiency and technological change in French agriculture during 2002-2015: a Färe-Primont index decomposition using group frontiers and meta-frontier

ABSTRACTThe objective of the article is to assess productivity change in French agriculture during 2002–2015; namely, total factor productivity (TFP) change and its components – technological change and efficiency change. For this, we use the Färe-Primont index which verifies the multiplicatively completeness property and is also transitive, allowing for multi-temporal and -lateral comparisons. We investigate the extent of heterogeneity within each type of farming sub-sample in terms of TFP change, with the help of the Herfindahl-Hirschman index (HHI). In addition, to compare the technologies among the five types of farming considered, we extend our analysis to the meta-frontier framework. Results indicate that during 2002–2015, all farms experienced TFP progress. The smallest average increase was experienced by the dairy farms and the largest by the field crop farms and the beef farms. The latter had the strongest technological progress but a deterioration in efficiency, while the opposite was found for field crop farms. The analysis of HHI reveals that sheep or goat farms are the most homogenous in terms of the direction of TFP change experienced over the period 2002–2015. The meta-frontier analysis shows that field crop farms’ technology is the most productive of all the types of farming.

Is the emotional impression affected by the chromatic stylization in dynamic advertisements?

A balanced panel of 103 countries for the period 1995–2011 is introduced into a metafrontier framework to gain insight into the idiosyncratic performance of countries in two distinct groups — developed (Annex I) countries and developing (non-Annex I) countries. We measure efficiency using a generalized directional distance function model suitable for dealing with anthropogenic emissions. The measurement of efficiency and technology gaps takes into account the group-specific heterogeneity. Moreover, we examine the convergence-divergence hypothesis for the technology gaps defined for each period. Our findings reveal significant patterns between the groups and among countries.

A cross-country evaluation of environmental performance: Is there a convergence-divergence pattern in technology gaps?

A balanced panel of 103 countries for the period 1995–2011 is introduced into a metafrontier framework to gain insight into the idiosyncratic performance of countries in two distinct groups — developed (Annex I) countries and developing (non-Annex I) countries. We measure efficiency using a generalized directional distance function model suitable for dealing with anthropogenic emissions. The measurement of efficiency and technology gaps takes into account the group-specific heterogeneity. Moreover, we examine the convergence-divergence hypothesis for the technology gaps defined for each period. Our findings reveal significant patterns between the groups and among countries.

European countries’ competitiveness and productive performance evolution: unraveling the complexity in a heterogeneity context

This paper is developed around two major arguments. First, the European Country Specific Industrial Structures (CSIS) technology gap defined in a metafrontier framework, captures the productive performance of the examined European CSIS conditional on the country-specificities, and therefore mirrors the micro-component of country competitiveness. Second, the evolution patterns of technology gaps, incorporating a time varying and group specific path dependence process as well as the features of the corresponding growth curve, reflect the contribution of the micro-component on the foundational country competitiveness. We use a balanced panel dataset that includes thirteen industries from seventeen European countries industries covering an 8 year period and employ a two stage approach. First, we employ a metafrontier framework for the estimation of productive performance and, at a second stage, we adopt and further develop a Growth Mixture Autoregressive Latent Trajectory model. This empirical strategy allows for the identification of heterogeneous groups with respect to the evolution patterns and for the consideration of group specific and time varying path dependence of European CSIS technology gaps evolution patterns. Empirical findings confirm the existence of two distinct groups that, over time, become more divergent but also more concentrated around their center. Finally, empirical evidence suggests that the micro component of foundational competitiveness, captured by CSIS technology gaps evolution patterns, exerts a differential impact on EU country overall foundational competitiveness.

An alternative metafrontier framework for measuring the heterogeneity of technology

AbstractThe metafrontier framework proposed by O'Donnell et al. enables the evaluation of relative efficiencies for decision‐making units (DMUs) operating under heterogeneous technologies. The metatechnology ratio (MTR) constructed under the metafrontier framework helps estimate the gap between group frontiers and the metafrontier, with its score between 0 and 1. However, an unreasonable MTR value (ie, greater than 1) may appear when the traditional metafrontier framework is applied in the nonradial data envelopment analysis (DEA) models. This article proposes an alternative metafrontier framework for addressing this issue. The newly constructed technology gap measurement (TGM) can avoid unreasonable technology gap ratio values in nonradial DEA models and substitute for MTR in radial DEA models. To demonstrate how this alternative metafrontier approach works, this article applies it to the efficiency evaluation of regional transportation sectors in China.

Colonial Legacy and Economic Efficiency across Africa: A Metafrontier Approach

AbstractThis paper attempts to estimate comparable efficiency scores for 40 African countries over the period 1975–2014, adopting the metafrontier framework which allows the decomposition of the overall technical efficiency into technology gap ratio and standard technical efficiency (Huang et al., ). We tested whether colonial legacy, proxied by country's first official language, based on stochastic frontiers were preferred to the pooled stochastic frontier. Consequently, we split countries into the three following groups: French‐speaking countries, English‐speaking countries, and other African countries. Efficiency measures results showed that there is, on average, more efficiency matters than technology gap issues. In addition, the extent of those challenges varies from one group of countries to another. It is found that the efficiency issue is more pronounced among English‐speaking countries, while the main challenge for French‐speaking countries is related to technology gap. Results also show that the appropriate trade, monetary, and financial sector‐oriented policies may help countries to close their technology gap.

Technical efficiency of small and medium manufacturing firms in Vietnam: A stochastic meta-frontier analysis

Small and medium-size enterprises (SMEs) play a vital role in the Vietnamese economy; hence more understanding of their efficiency is of interest for a variety of various stakeholders in Vietnam. This paper estimates technological gaps and identifies factors affecting variations in the technical efficiency of SMEs in Vietnam using firm-level survey data in 2008 in a stochastic meta-frontier framework. We found that, on average, SMEs can increase their current outputs by eight percent using the same quantity of inputs. Firms operating in major cities such as Hanoi and Ho Chi Minh City are found to be more efficient and possess better technology. Our evidence indicates that most SMEs in Vietnam use relatively low-level technologies, evidenced by the higher return from labour and raw materials than that from capital.

Farm performance analysis: Technical efficiencies and technology gaps of Nepalese farmers in different agro-ecological regions

This paper employs a stochastic metafrontier framework to examine technical efficiencies and technology gaps of Nepalese farmers in different agro-ecological regions. On average, the technical efficiency level derived from the regional frontier is 81%, from the metafrontier it is 57%, and the technological gap ratio is 70%. There is therefore a clear opportunity to improve the performance of farming households within regions through improving farmer’s education, farming experiences, and by adopting climate change adaptation practices. Also indicated is that agricultural policies should be developed to reduce the technology gap between specific regions and the overall agricultural sector. In this context, this study highlights the need to improve farmers’ access to agricultural markets, livelihood diversification and strengthening social capital such as farmers’ participations in relevant agricultural organizations.

Measuring the Sustainable Performance of Industrial and Commercial Service Industries in Taiwan

This study proposed a performance model with slack-based measure under the meta-frontier framework, in order to assess the sustainable performance on industrial and service enterprises in Taiwan, after its 2009 Renewable Development Act. We observed that the sustainable performance had improved slightly due to energy-saving technologies and the low-carbon energy structure under the growth scale of Taiwan?s economy in the last decade. These were effective strategies for guiding industries with large quantity of CO2 emissions to improve their production activities, especially for the reduction of fossil fuel usage. We can draw several policy implications from the evaluation results. First, from the viewpoint of meta-frontier, because industrial sectors played an important role in CO2 emission, the government should aim to boost their pollution reduction performance. Second, since the electricity contributes to the most part of the energy consumption structure, switching to a low-carbon electricity supply portfolio would be necessary to decrease CO2 emissions. From the analysis, we could conclude that relying solely on the expansion of renewable energy capacity would not be the best antidote to CO2 reduction by considering the cost and other economic complications.

Modeling the incidence of international trade on Italian regional productive efficiency using a meta-frontier DEA approach

Although there continues to be considerable debate about the impact of European integration on the EU regions, studies in this field have mainly investigated the convergence-divergence issue, while the effect of trade on regional performance has attracted few empirical studies. A bootstrapped DEA metafrontier framework used in this study, as a first stage of analysis, is exploited to account for the heterogeneity between the Italian regions in the whole period and in two distinct time frames before and after EMU implementation. In a second stage, using a partial least squares model, the technology gaps estimated for each period are regressed, investigating factors related mainly to R&D efforts and trade behavior that may have affected regional performance. Our findings reveal a significant improvement for the Italian regions since 1993, a paradoxically unchanged behavior for efficiency performance in the Center-North regions, and clear identification of which regions performed better in terms of the technology gap. Inclusion of variables related to international trade performance in the model indicates that trade is of major importance for better regional performance. In addition, the technology gap is negatively influenced by R&D expenditures, denoting the catching-up phenomenon for the technology level of Italian regions.

Metafrontier analysis on productivity for West Coast of South Pacific terminals

This paper measures productivity of port terminals in Peru and Chile, and evaluates the influence of the certain specific explanatory variables that may explain their differences in productivity. In the first stage, a DEA-Malmquist model in a metafrontier framework is used to obtain the productivity scores. This approach lets us take the possible technological differences among the port terminals into account. In the second stage, an Arellano-Bond model was estimated, to explain the differences in productivity change. The empirical evidence shows that the Class 1 terminals produce output under certain less favourable technological conditions than the Class 2 terminals. Moreover, on average, both classes present positive evolutions of the catching up effect, which shows that the terminals as a whole are moving nearer to the efficiency metafrontier. We also observe a technological regress during 2004–2014 and that the terminals have been affected by the financial crisis which started in the United States in 2008. Finally, we identified that the container/bulk rate and that private management contribute positively to the change in productivity, whereas the bulk rate and the total factor productivity change lagged contribute negatively.

CO2 Emission Performance, Mitigation Potential, and Marginal Abatement Cost of Industries Covered in China’s Nationwide Emission Trading Scheme: A Meta-Frontier Analysis

China’s nationwide emission trading scheme (CN-ETS) is scheduled to be launched in 2017. It is of great urgency and necessity to obtain a good understanding of the participating sectors of CN-ETS in terms of energy utilization and CO2 emissions. In this regard, it should be noted that the findings may be biased without taking industry heterogeneity into consideration. To this end, a meta-frontier framework with the directional distance function is employed to estimate the CO2 emission performance (CEP), mitigation potential (MP), and marginal abatement cost (MAC) at sector levels under the meta-frontier and the group-frontier. The results indicate that significant disparities in the CEP, MP, and MAC exist under both frontiers among various sectors, and the sectoral distributions of CEP, MP, and MAC are found to be different between the two frontiers. Additionally, the differences between the two frontiers in terms of CEP, MP, and MAC are considerable, and exhibit unequal distributions among these sectors. Notably, MAC under both frontiers and the difference between them are found to be significantly correlated with the carbon intensity. Finally, policy implications are provided for the government and participating enterprises, respectively.