Lurking in the Shadows: Testing For Shadow Price Differences with Applications in Economic Regulation
Posted: 20 Nov 2017 Last revised: 13 Dec 2017
Date Written: November 17, 2017
This paper introduces a novel approach for statistically testing group differences in shadow price estimates produced by non parametric efficiency models. The test can be applied across groups being assessed using a common efficient frontier or across groups assessed using different efficient frontiers. We demonstrate empirical use cases of each by analysing the impact of regulatory imposition in European banking and European sport respectively. Each example suggests significant unintended consequences of regulation.
Keywords: stochastic DEA, shadow prices statistical testing, efficiency analysis, frontier estimation, stochastic nonparametric envelopment of data (StoNED), economic regulation
JEL Classification: C44, C12, C14
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