Table 5 Characteristics of DEA and SFA.
DEA | SFA |
|---|---|
Non-parametric approach | Parametric approach |
Deterministic approach | Stochastic approach |
Does not consider random noise | Consider random noise |
Does not allow statistical hypotheses to be contrast | Allow statical hypotheses to be contrasted |
Does not include an error term | Imposes assumptions on the distribution of the inefficiency term |
Does not require specifying a functional form | Requires specifying a functional form |
Sensitive to the number of variables measurement errors and outliers | Can confuse inefficiency with a poor specification of the model |
Estimation method: mathematical programming | Estimation method: econometric |