Abstract
In this paper we examine the productive performance of a group of three East European carriers and compare it to thirteen of their West European competitors during the period 1977–1990. We first model the multiple output/multiple input technology with a stochastic distance frontier using recently developed semiparametric efficient methods. The endogeneity of multiple outputs is addressed in part by introducing multivariate kernel estimators for the joint distribution of the multiple outputs and potentially correlated firm random effects. We augment estimates from our semiparametric stochastic distance function with nonparametric distance function methods, using linear programming techniques, as well as with extended decomposition methods, based on the Malmquist index number. Both semi- and nonparametric methods indicate significant slack in resource utilization in the East European carriers relative to their Western counterparts, and limited convergence in efficiency or technical change between them. The implications are rather stark for the long run viability of the East European carriers in our sample.
Similar content being viewed by others
References
Adams, R. A., A. Berger and R. C. Sickles. (1999). “Semiparametric Approaches to Stochastic Panel Frontiers with Applications to the Banking Industry.” Journal of Business and Economics Statistics 17, 349-358.
Ahn, S., D. Good and R. C. Sickles. (1999). “Assessing the Relative Efficiency of Asian and North American Airline Firms.” In Tsu-tan Fu, Cliff J. Huang and C. A. K. Lovell (eds.), Economic Efficiency and Productivity Growth in the Asia Pacific Region. pp. 67-94. UK: Edward Elgar Publishing Limited.
Ahn, S., D. Good and R. C. Sickles. (2000). “Estimation of Long-Run Inefficiency Levels: A Dynamic Frontier Approach.” Econometric Reviews, Forthcoming.
Aghion, P. (1993). “Economic Reform in Eastern Europe.” European Economic Review 37, 525-532.
Alam, I. S. and R. C. Sickles. (2000). “Time Series Analysis of Deregulatory Dynamics and Technical Efficiency: The Case of the U.S. Airline Industry.” International Economic Review 41, 203-218.
Avmark. (1992). The Competitiveness of the European Community's Air Transport Industry, prepared for the Commission of the European Communities.
Barla, P. and S. Perelman. (1989). “Technical Efficiency in Airlines under Regulated and Deregulated Environments.” Annales de l'Economie Publique Sociale et Cooperative 60, 61-80.
Bergson, A. (1987). “Comparative Productivity: The USSR, Eastern Europe, and the West.” American Economic Review 77, 342-357.
Blanchard, O., R. Dornbusch, P. Krugman, R. Layard and L. Summers. (1991). Reform in Eastern Europe. Cambridge, MA: M.I.T. Press.
Bjurek, H., F. R. Førsund and L. Hjalmarrson. (1997). “Malmquist Productivity Indexes: An Empirical Comparison.” In R. Färe, S. Grosskopf and R. R. Russell (eds.), Index Numbers; Essays in the Honor of Sten Malmquist. Boston: Kluwer Academic Publishers.
Captain, P. and R. C. Sickles. (1997). “Competition and Market Power in the European Airline Industry: 1976-1990.” Managerial and Decision Economics 18(3), 209-225.
Caves, D. W., L. R. Christensen and W. E. Diewert. (1982). “Output, Input and Productivity Using Superlative Index Numbers.” Economic Journal 92, 73-96.
Caves, D.W., L. R. Christensen and M. W. Tretheway. (1984). “Economies of Density Versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ.” The Rand Journal of Economics 15, 471-489.
Charnes, A. and W. W. Cooper. (1985). “Preface to Topics in Data Envelopment Analysis.” Annals of Operations Research 2, 95-112.
Charnes, A., W. W. Cooper and E. L. Rhodes. (1978). “Measuring the Efficiency of Decision Making Units.” European Journal of Operational Research 2, 429-444.
Coelli, T., S. Perelman and E. Romano. (1999). “Accounting for Environmental Influences in Stochastic Frontier Models with Application to International Airlines.” Journal of Productivity Analysis 11, 251-273.
Cooper, W. W., L. M. Seiford and K. Tone. (2000). Data Envelopment Analysis. Boston: Kluwer Academic Publishers.
Coricelli, F. and G. M. Milesi-Ferretti. (1993). “A Note onWage Claims and Soft Budget Constraints in Economies in Transition.” European Economic Review 37, 387-395.
Cornwell, C., P. Schmidt and R. C. Sickles. (1990). “Production Frontiers with Cross-Sectional and Time-Series Variation in Efficiency Levels.” Journal of Econometrics 46, 185-200.
Dewatripoint, M. and G. Roland. (1992). “The Virtues of Gradualism and Legitimacy in the Transition to a Market Economy.” Economic Journal 102, 291-300.
Dowrick, S. (1992). “Technological Catch Up and Diverging Incomes: Patterns of Economic Growth 1960-1988.” Economic Journal 102, 600-610.
de Murias, R. (1990). The Economic Regulation of International Air Transport. Jefferson, NC: McFarland and Company.
Eads, G. C. (1972). The Local Service Airline Experiment. Washington, DC: Brookings Institution.
Färe, R., S. Grosskopf, B. Lindgren and P. Ross. (1992). “Productivity Changes in Swedish Pharmacies 1980-1989: A Non-Parametric Malmquist Approach.” Journal of Productivity Analysis 3, 85-101.
Färe, R., S. Grosskopf, M. Norris and Z. Zhang. (1993). “Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries.” American Economic Review 84, 66-83.
Färe, R., S. Grosskopf and C. A. K. Lovell. (1994). Production Frontiers. New York: Cambridge University Press.
Färe, R., S. Grosskopf and R. R. Russell (eds.). (1997). Index Numbers; Essays in the Honor of Sten Malmquist. Boston: Kluwer Academic.
Farrell, M. J. (1957). “The Measurement of Productive Efficiency.” Journal of the Royal Statistical Society Series A 120(3), 253-282.
Førsund, F. R. (1997). “The Malmquist Productivity Index, TFP and Scale.” Mimeo, University of Oslo.
Good, D. H., M. I. Nadiri, L.-H. Röller and R. C. Sickles. (1993). “Efficiency and Productivity Growth Comparisons of European and U.S. Air Carriers: A First Look at the Data.” In J. Mairesse and Z. Griliches (eds.), Journal of Productivity Analysis 4, 115-125.
Good, D. H., L.-H. Röller and R. C. Sickles. (1993). “U.S. Airline Deregulation: Implications for European Transport.” Economic Journal 103, 1028-1041.
Good, D. H., L.-H. Röller and R. C. Sickles. (1995). “Airline Efficiency Differences Between Europe and the U.S.: Implications for the Pace of E. C. Integration and Domestic Regulation.” European Journal of Operations Research 80, 508-518.
Good, D. H., M. I. Nadiri and R. C. Sickles. (1997). “Index Number and Factor Demand Approaches to the Estimation of Productivity.” In M. H. Pesaran and P. Schmidt (eds.), Handbook of Applied Econometrics, Volume II-Microeconometrics, pp. 14-80. Chapter 2. Cambridge, UK: Basil Blackwell.
Good, D. H., A. Postert and R. C. Sickles. (1997). “A Model of World Aircraft Demand.” Mimeo.
Grifell-Tatjé, E. and C. A. K. Lovell. (1996). “Deregulation and Productivity Decline: The Case of Spanish Savings Banks.” European Economic Review 40, 1281-1303.
Hughes, G. and P. Hare. (1992), “Industrial Restructuring in Eastern Europe.” European Economic Review 36, 670-676.
Hultberg, P., M. I. Nadiri and R. C. Sickles. (1999). “An International Comparison of Technology Adoption and Efficiency: A Dynamic Panel Model.” In Patrik Sevestre (ed.), Annales d' Économie et de Statistique, Special Issue in Commemoration of the 20th Anniversity of the Panel Data Conference 55-56, 449-474.
Kaspar, D. M. (1991). Deregulation and Globalization: Liberalizing International Trade in Air Services. Cambridge MA: Ballinger Publishing Co.
Lovell, C. A. K., S. Richardson, P. Travers and L. Wood. (1994). “Resources and Functionings: A New View of Inequality in Australia, in Models and Measurement ofWelfare and Inequality.” In W. Eichhorn (ed.), Heidelberg: Springer-Verlag, 787-807.
Moroney, J. R. (1990). “Energy Consumption, Capital and Real Output: A Comparison of Market and Planned Economies.” Journal of Comparative Economics 14, 199-220.
Moroney, J. R. and C. A. K. Lovell. (1992). “The Performance of Market and Planned Economies Revisited.” Mimeo.
Oum, T. H. and C. Yu. (1998). “Cost Competitiveness of Major Airlines: An International Comparison.” Transportation Research Part A 32(6), 407-422.
Park, B. and L. Simar. (1994). “Efficient Semiparametric Estimation in Stochastic Frontier Models.” Journal of the American Statistical Association 89, 929-936.
Park, B., R. C. Sickles and L. Simar. (1998). “Stochastic Panel Frontiers: A Semiparametric Approach.” Journal of Econometrics 84, 273-301.
Portes, R. (1992). “Structural Reform in Central and Eastern Europe.” European Economic Review 36, 661-669.
Röller, L.-H. and R. C. Sickles. (2000). “Capacity and Product Market Competition: Measuring Market Power in a 'Puppy-Dog' Industry.” Forthcoming in the International Journal of Industrial Organization.
Roland, G. (1993). “The Political Economy of Restructuring and Privatization in Eastern Europe.” European Economic Review 37, 533-540.
Sickles, R. C. (1985). “A Nonlinear Multivariate Error-Components Analysis of Technology and Specific Factor Productivity Growth with an Application to the U.S. Airlines.” Journal of Econometrics 27, 61-78.
Sieford, L. and R. M. Thrall. (1990). “Recent Developments in DEA: The Mathematical Approach to Frontier Analysis.” Journal of Econometrics 46, 7-38.
Taneja, N. K. (1988). The International Airline Industry. Lexington, MA: Lexington Books.
White, L. J. (1979). “Economies of Scale and the Question of Natural Monopoly in the Airline Industry.” Journal of Air Law and Commerce 44, 545-573.
Wyploz, C. (1993). “The Transformation of Eastern Europe: Macroeconomic Issues.” European Economic Review 37, 379-386.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Sickles, R.C., Good, D.H. & Getachew, L. Specification of Distance Functions Using Semi- and Nonparametric Methods with an Application to the Dynamic Performance of Eastern and Western European Air Carriers. Journal of Productivity Analysis 17, 133–155 (2002). https://doi.org/10.1023/A:1013592506555
Issue Date:
DOI: https://doi.org/10.1023/A:1013592506555