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  • Evaluating the accuracy of scope economies: comparisons among delta method, bootstrap, and Bayesian approach

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    103729_1.pdf (280.1Kb)
    Author(s)
    Zhang, Liang-Cheng
    Worthington, Andrew Charles
    Griffith University Author(s)
    Worthington, Andrew C.
    Zhang, Liang-Cheng
    Year published
    2015
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    Abstract
    The estimate of scope economies is a nonlinear combination of estimated coefficients from an empirical model. This estimate usually involves out-of-sample predictions when calculating the separated costs (as a part of calculation of scope economies). These difficulties make it hard to give the precise prediction and to calculate the standard deviation of this estimate along with its confidence intervals. In this paper, we demonstrate methods for constructing confidence interval for scope economies to allow researchers to draw inferences from estimated economies of scope. We review the common approaches such as delta method ...
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    The estimate of scope economies is a nonlinear combination of estimated coefficients from an empirical model. This estimate usually involves out-of-sample predictions when calculating the separated costs (as a part of calculation of scope economies). These difficulties make it hard to give the precise prediction and to calculate the standard deviation of this estimate along with its confidence intervals. In this paper, we demonstrate methods for constructing confidence interval for scope economies to allow researchers to draw inferences from estimated economies of scope. We review the common approaches such as delta method or bootstrap adopted by previous studies. In contrast of the above approximation methods, this study also proposes an alternative method, Bayesian approach, to produce full predictive distribution for this measure with posterior distribution. To demonstrate these three approaches, we use a balanced panel data including 37 Australian public universities over the period 2003-12. All three approaches use a quadratic cost function with two outputs.Estimates of scope economies will be calculated with the sample data and estimated parameters from the model. Results shows that our Bayesian approach gives the most precise (the least standard deviations) among all approaches.
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    Conference Title
    2015 Australian Conference of Economists
    Publisher URI
    http://ace2015.org.au/
    Copyright Statement
    © 2015 Economic Society of Australia. The attached file is reproduced here in accordance with the copyright policy of the publisher. Please refer to the conference's website for access to the definitive, published version.
    Subject
    Econometric and Statistical Methods
    Publication URI
    http://hdl.handle.net/10072/69409
    Collection
    • Conference outputs

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