News

Dr. Andrew Johnson, Texas A&M University, gives a tutorial of CNLS and StoNED methods at the DEA2012, 10th International Conference on Data Envelopment Analysis, Natal, Brazil, August 27 to 30, 2012. The tutorial is scheduled on Monday 27 August, 2-5 PM. The registration fee for the tutorial is €50, or €10 for those who already registered to the conference. The link to the tutorial registration is:

http://web.face.ufmg.br/face/inscricoes/dea2012/loginTutorial.html.php

Following the recent publication of the original STONED ARTICLE by TIMO KUOSMANEN and MIKA KORTELAINEN in the volume 38 number 1 of the JOURNAL OF PRODUCTIVITY ANALYSIS (JPA), the article is rising again to the top 5 in the JPA's most downloaded articles ranking. The paper currently ranks #1 in the 7-days, #3 in the 30-days, and #5 in the 90-days downloads statistics available on the JPA website.

The online version of the article has been available on the JPA website since December 2010. The online article was downloaded 146 times in the first month and 451 times in the first 3 months. 

The online article is available with OPEN ACCESS, FREE of charge, from the following permanent link: 

HTTP://DX.DOI.ORG/10.1007/S11123-010-0201-3.

The consulting firm Oxera has prepared a review of the Finnish energy regulator's benchmarking methods, focusing on the StoNED method. In its review, Oxera finds that

"StoNED is an innovative method that has been recently peer-reviewed and published in the academic literature. The method attempts to address the main criticisms that are usually presented against data envelopment analysis and stochastic frontier analysis (SFA) by attempting to combine the non-parametric DEA-style frontier with the stochastic SFA-style treatment of inefficiency and noise."

As advantages of the StoNED method, Oxera states the following:

"- the main advantage of the StoNED approach over the parametric SFA approach is its use of a flexible (ie, non-parametric) frontier and thus avoidance of needing to specify a particular functional form of the cost function;

- the main advantage of StoNED over the DEA approach is the SFA-style treatment of separating inefficiency and noise."

The authors of Oxera's review are Alan Horncastle (Managing Consultant), Dr. Srinivasan Parthasarathy (Consultant), Professor Emmanuel Thanassoulis (Associate), and Professor Subal C. Kumbhakar (Associate).

The original StoNED article by TIMO KUOSMANEN and MIKA KORTELAINEN where the method is introduced has been published in the printed issue of JOURNAL OF PRODUCTIVITY ANALYSIS, Volume 38, number 1, pages 11-28. Please update your references!

The permanent DOI reference of the article is: 10.1007/S11123-010-0201-3. Click the DOI link to download the article for FREE!

The article is published in the Springer's Open Choice program, which means the article is available with open access, free of charge, anytime, and anywhere in the world.

Energy Economics has accepted the paper by Timo Kuosmanen, which describes the application of StoNED in the regulation of electricity distribution networks in Finland. The Finnish Energy Market Authority (ENERGIAMARKKINAVIRASTO EMV) applies the StoNED method as an integral part of their regulatory model since 2012. The forthcoming Energy Economics article describes the model used by EMV, the results obtained using the StoNED method, and some econometric specification tests. The data and the GAMS code used in the estimation are provided as supplementary online appendices to the article. An English version of the Excel spreadsheet application for computing the StoNED efficiency estimates and cost targets, used by the Finnish regulator and the distribution firms, is also provided online as supplementary material.

The permanent DOI reference of the article is the following: http://dx.doi.org/10.1016/j.eneco.2012.03.005

The working paper version of the article is freely available here: http://ssrn.com/abstract=1806867

The 13th EWEPA conference will be held in 17 - 20 June 2013 in Helsinki, at Aalto University School of Economics. The website of the conference is online at

www.ewepa.org.

The conference website currently provides some basic information and photos of the conference site. We will gradually update the website with more content and useful information. The paper submission and registration systems will be integrated to the website in due course. Our plan is to utilize the website for distributing information during the conference in such forms as pdf files of papers, blogs and videos.

In the follow-up study of the StoNEZD paper in the Journal of Productivity Analysis, Andrew Johnson and Timo Kuosmanen examine the properties of Two-Stage DEA (2-DEA) and develop a new One-Stage DEA (1-DEA) approach. The 1-DEA paper is forthcoming in European Journal of Operational Research, and it is available online since 24 Jan 2012. The permanent link to the 1-DEA paper in EJOR is the following:

http://dx.doi.org/10.1016/j.ejor.2012.01.023

1-DEA can be seen as a truncated version of the StoNEZD approach, which facilitates the joint estimation of the axiomatic, DEA-style piecewise linear frontier and a linear regression function involving z-variables that influence productivity (but are not inputs as such). In addition to the development of 1-DEA, the authors show that 2-DEA is consistent even if z-variables are correlated with inputs, and examine the sources of bias in 2-DEA estimation. Extensive Monte Carlo simulations show that the 1-DEA method systematically outperforms 2-DEA in precision, even when the truncation point is misspecified.

In a forthcoming Energy Economics article, Maethee Mekaroonreung and Andrew Johnson apply StoNED to estimate the shadow prices of SO2 and NOx emissions from U.S. coal-fired power plants. To model undersirable outputs, the authors employ the axiom of weak disposability, adapting the weakly disposable technology by Kuosmanen (2005) to the stochastic framework. Applying the StoNED method with a composite disturbance term, the authors obtain the average shadow prices estimates of SO2 are between 201 and 343 $/ton and average shadow prices of NOx are between 409 and 1,352 $/ton. These shadow price estimates were in reasonable ranges compared to the EPA’s allowance prices, which suggests that using the proposed method to estimate the
shadow prices of other pollutants will help regulators and the power industry establish references for marginal abatement costs. The authors recommend the use of weak disposability StoNED method over weak disposability DEA, which is likely to overestimate shadow prices due to extreme observations.

The style of the StoNED website has been modernized, in connection to the development of the new websites for the NOMEPRE network and the EWEPA”13 conference.  Our efforts to update the content of the StoNED homepage will continue, and this might cause some technical problems in the coming months. We hope the redesigned website will serve our readership better, and we apologize for any inconvenience due to the development and maintenance efforts.

The 14th European Workshop on Efficiency and Productivity Analysis will take place on June, 16-18, 2015 at Grand Marina Congress Center, Helsinki Finland. On June 15, 2015 the traditional pre-conference with popular young resercher workshop and software tutorials is held at Aalto University School of Business, Helsinki, Finland. 

Call for papers:Theoretical and empirical papers on productivity, production theory, industrial organization and efficiency analysis are invited; submit online through the conference website: 

http://ewepa.org.

Multi-disciplinary EWEPA Conference brings together academics and practitioners from such fields as economics, operations research, management science, industrial engineering, and statistics among others. Empirical studies cover a wide spectrum of industries and application areas including education, health care, energy, finance, agriculture, transport, and utilities among many others.

Article by ANDREW JOHNSON and TIMO KUOSMANEN that extends the StoNED method to deal with z-variables that characterize operating environment of firms (referred to as StoNEZD) has been published online at the website of JOURNAL OF PRODUCTIVITY ANALYSIS. The permanent DOI reference of the article is: 10.1007/S11123-011-0231-5.

 

Understanding the effects of operational conditions and practices on productive efficiency can provide valuable economic and managerial insights. Recent article by ANDREW JOHNSON and TIMO KUOSMANEN extends the StoNED method to deal with z-variables that characterize operating environment of firms. The extended method is referred to as "stochastic semi-nonparametric envelopment of z-variables data (StoNEZD)." The StoNEZD article has been accepted for publication in the JOURNAL OF PRODUCTIVITY ANALYSIS. It is expected to appear in 2012, Volume 36 Issue 2.

The proposed StoNEZD method has several advantages for estimating the effects of contextual variables. The article by Johnson and Kuosmanen shows that the StoNEZD estimator is statistically consistent under more general assumptions than those required by the conventional two-stage semiparametric DEA approaches. In particular, the StoNEZD estimator remains consistent even when the noise term is unbounded and the contextual variables are correlated with inputs. Importantly, Johnson and Kuosmanen show that the StoNEZD estimator for the contextual variables is asymptotically efficient, asymptotically normally distributed, and converges at the standard parametric rate. These are the key properties to ensure that the conventional methods of statistical inference (such as t-tests for statistical significance and the confidence intervals) are valid for asymptotic inference, despite the nonparametric specification of the frontier and the presence of an asymmetric, non-normal disturbance term.

The article also reports evidence from Monte Carlo simulations. The results show that the StoNEZD estimator yields systematically more precise estimates than the conventional two-stage DEA method, whether noise is present or not. The Monte Carlo evidence provides strong support for using the one-stage StoNEZD method for joint estimation of the frontier and the contextual variables.

The article by Johnson and Kuosmanen was accepted to the special symposium issue of JOURNAL OF PRODUCTIVITY ANALYSIS consisting of the keynotes of the North American Productivity Workshop (NAPW) in Houston, 2-5 June 2010. The symposium issue is edited by Knox Lovell and Robin Sickles. The keynote speakers include William Cooper, Erwin Diewert, Dale Jorgenson, Peter Schmidt, Paul Wilson, William Greene, and Timo Kuosmanen.

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