Interpreting and Testing the Scaling Property in Models where Inefficiency Depends on Firm Characteristics
AbstractLet u ≥ 0 be technical inefficiency, let z be a set of variables that affect u, and let δ be the parameters of this relationship. The model satisfies the scaling property if u(z, δ) can be written as a scaling function h(z, δ) times a random variable u* that does not depend on z. This property implies that changes in z affect the scale but not the shape of u(z,δ). This paper reviews the existing literature and identifies models that do and do not have the scaling property. It also discusses practical advantages of the scaling property. The paper shows how to test the hypothesis of scaling, and other interesting hypotheses, in the context of the model of Wang, Journal of Productivity Analysis, 2002. Finally, two empirical examples are given. Copyright Springer Science+Business Media, LLC 2006
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Bibliographic InfoArticle provided by Springer in its journal Journal of Productivity Analysis.
Volume (Year): 25 (2006)
Issue (Month): 3 (06)
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Web page: http://www.springerlink.com/link.asp?id=100296
Stochastic frontier model; Scaling property; Technical inefficiency; C12; C31; C52;
Other versions of this item:
- Peter Schmidt & Antonio Alvarez & Christine Amsler, 2004. "Interpreting and testing the scaling property in models where inefficiency depends on firm characteristics," Econometric Society 2004 Far Eastern Meetings 520, Econometric Society.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
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