A comparison of nonparametric efficiency estimators: DEA, FDH, DEAC, FDHC, order-m and quantile

In this paper we compare six nonparametric estimators for technical efficiency and use them to evaluate the efficiency of the banking sector in Brazil.The estimators considered are data envelopment analysis (DEA), free disposal hull (FDH), bias corrected FDH (FDHC), bias corrected DEA (DEAC), order-m and alpha-conditional quantile.Their theoretical properties are discussed and their implementation is illustrated using a sample of 184 Brazilian banks that extends from 1995 to 2004.The results indicate that these estimators can lead to significant discrepancy in estimated efficiency scores.Order-m and alpha-conditional quantile estimators have proven to be useful tools in identifying extreme values and are shown to be rather robust relative to DEA and FDH.Bias correction for both DEA and FDH was problematic, producing significant changes in firms rankings and estimated efficiencies.The content of this paper does not necessarily represent the policies or official positions of the Brazilian Ministry of Finance.Responsibility for the content and views expressed in the paper lies entirely with the authors.