Testing for Productive Efficiency with Errors-in- Variables with an Application to the Dutch Electricity Sector

We develop a nonparametric test of productive efficiency that accounts for the possibility of errors-in-variables. The test allows for statistical inference based on the extreme value distribution of the L?? norm. In contrast to the test proposed by Varian, H (1985): 'Nonparametric Analysis of Optimising Behaviour with Measurement Error, Journal of Econometrics 30, 445458, our test can be computed using simple enumeration algorithms or linear programming. An empirical application for the Dutch electricity sector illustrates the proposed test procedure. 5001-6182 Business 4001-4280.7 Finance Management, Business Finance, Corporation Finance Library of Congress Classification (LCC) HB 143.5 Data processing M Business Administration and Business Economics G 3 Corporate Finance and Governance Journal of Economic Literature (JEL) C 14 Semiparametrric and Nonparametric Methods 85 A Business General 220 A Financial Management European Business Schools Library Group (EBSLG) 150 K Applied Econometrics Gemeenschappelijke Onderwerpsontsluiting (GOO) 85.00 Bedrijfskunde, Organisatiekunde: algemeen 85.30 Financieel management, financiering Classification GOO 83.03 Methoden en technieken Bedrijfskunde / Bedrijfseconomie Financieel management, bedrijfsfinanciering, besliskunde