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Technical efficiency in competing panel data models: a study of Norwegian grain farming

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  • Subal Kumbhakar
  • Gudbrand Lien
  • J. Hardaker

Abstract

Estimation of technical efficiency is widely used in empirical research using both cross-sectional and panel data. Although several stochastic frontier models for panel data are available, only a few of them are normally applied in empirical research. In this article we chose a broad selection of such models based on different assumptions and specifications of heterogeneity, heteroskedasticity and technical inefficiency. We applied these models to a single dataset from Norwegian grain farmers for the period 2004–2008. We also introduced a new model that disentangles firm effects from persistent (time-invariant) and residual (time-varying) technical inefficiency. We found that efficiency results are quite sensitive to how inefficiency is modeled and interpreted. Consequently, we recommend that future empirical research should pay more attention to modeling and interpreting inefficiency as well as to the assumptions underlying each model when using panel data. Copyright Springer Science+Business Media, LLC 2014

Suggested Citation

  • Subal Kumbhakar & Gudbrand Lien & J. Hardaker, 2014. "Technical efficiency in competing panel data models: a study of Norwegian grain farming," Journal of Productivity Analysis, Springer, vol. 41(2), pages 321-337, April.
    • Handle: RePEc:kap:jproda:v:41:y:2014:i:2:p:321-337
    DOI: 10.1007/s11123-012-0303-1
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    More about this item

    Keywords

    Stochastic frontier models; Panel data; Heteroskedasticity; Heterogeneity; Persistent and residual technical inefficiency; C23; D24; O30; Q12;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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