Cost Efficiency Analysis Based on the DEA and StoNED Models: Case of Norwegian Electricity Distribution Companies

6 Pages Posted: 28 Jun 2014 Last revised: 13 Dec 2014

See all articles by Xiaomei Cheng

Xiaomei Cheng

Independent; Norwegian School of Economics

Endre Bjorndal

Norwegian School of Economics (NHH) - Department of Business and Management Science

Mette Helene Bjorndal

Norwegian School of Economics (NHH) - Department of Business and Management Science

Date Written: June 26, 2014

Abstract

Our paper applies data envelopment analysis (DEA) and stochastic non-parametric envelopment of data (StoNED) to measure cost efficiency of electricity distribution companies. The data cover 123 Norwegian electricity distribution companies during 2004-2010, and the performance of these companies is compared across the two models with and without environmental variables, i.e., variables that account for local conditions that affect the companies’ costs. The results indicate that the cost efficiency estimates with the StoNED approach are much higher than with the DEA method when we do not consider environmental variables. It shows that the choice of estimation methods is important with respect to the estimated impact of environmental variables on the performance. In addition, the inclusion of the environmental variables has considerable effect on the classification of companies with respect to local returns to scale.

Keywords: Cost efficiency, DEA, Environmental variables, Regulation, StoNED

JEL Classification: Q00

Suggested Citation

Cheng, Xiaomei and Cheng, Xiaomei and Bjorndal, Endre and Bjorndal, Mette Helene, Cost Efficiency Analysis Based on the DEA and StoNED Models: Case of Norwegian Electricity Distribution Companies (June 26, 2014). NHH Dept. of Business and Management Science Discussion Paper No. 2014/28, Available at SSRN: https://ssrn.com/abstract=2459854 or http://dx.doi.org/10.2139/ssrn.2459854

Norwegian School of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway

Endre Bjorndal

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Mette Helene Bjorndal

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
126
Abstract Views
846
Rank
404,654
PlumX Metrics