Efficiency Measurement: A Nonparametric Approach

The aim of the paper is to present a statistical methodology allowing a meaningful comparison of the production performance of firms without resorting to the usual concept of production frontier. We introduce an efficiency measure based on a nonstandard conditional distribution and propose a two-stage estimation procedure with a smoothing step followed by an isotonization step. We illustrate the approach through a simulated example and an analysis of the performance of Spanish electricity distributors.