THE IMPACT OF OUTLIERS AND LEVERAGE POINTS FOR TECHNICAL EFFICIENCY MEASUREMENT USING HIGH BREAKDOWN PROCEDURES

Given that most data used for production studies have not been accumul ated for such purposes, it is important that the quantitative tools fo r messy data which can affect the accuracy of computed technical effic iency measures be found. In this study, high breakdown robust methods are used in conjunction with a robust distance measure defined relativ e to the minimum volume ellipsoid estimator. The standardized robust r esiduals from the high breakdown estimators and the robust distance me asures are used to statistically and graphically depict both multivari ate outliers and leverage points. Once these points are found, their r elationship to those observations that exhibit strong technically effi cient or inefficient behavior, scale inefficiency and/or unusual produ ction characteristics is analyzed for three linerboard manufacturing f acilities. Additionally, the impact of the outliers and leverage point s on the estimated least squares coefficients which are used by the co rrected ordinary least squares methodology to compute the full-frontie r technical efficiency measures is explored. Finally, a sensitivity an alysis of the impact of outliers and leverage points on the computed l inear programming based technical efficiency measures is presented.