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Stochastic frontier models with network selectivity

Author

Listed:
  • William C. Horrace

    (Syracuse University)

  • Hyunseok Jung

    (University of Arkansas)

Abstract

Worker peer-effects and managerial selection have received limited attention in the stochastic frontier analysis literature. We develop a parametric production function model that allows for worker peer-effects in output and worker-level inefficiency that is correlated with a manager’s selection of worker teams. The model is the usual “composed error” specification of the stochastic frontier model, but we allow for managerial selectivity (endogeneity) that works through the worker-level inefficiency term. The new specification captures both worker-level inefficiency and the manager’s ability to efficiently select teams to produce output. As the correlation between the manager’s selection equation and worker inefficiency goes to zero, our parametric model reduces to the normal-exponential stochastic frontier model of Aigner et al. (1977) with peer-effects. A comprehensive application to the NBA is provided.

Suggested Citation

  • William C. Horrace & Hyunseok Jung, 2018. "Stochastic frontier models with network selectivity," Journal of Productivity Analysis, Springer, vol. 50(3), pages 101-116, December.
    • Handle: RePEc:kap:jproda:v:50:y:2018:i:3:d:10.1007_s11123-018-0537-7
    DOI: 10.1007/s11123-018-0537-7
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    References listed on IDEAS

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    Cited by:

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    2. Orea, Luis & Álvarez, Inmaculada C., 2019. "Spatial Production Economics," Efficiency Series Papers 2019/06, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    3. Sadick Mohammed & Awudu Abdulai, 2022. "Do Egocentric information networks influence technical efficiency of farmers? Empirical evidence from Ghana," Journal of Productivity Analysis, Springer, vol. 58(2), pages 109-128, December.
    4. Jonathan R. McFadden & Alicia Rosburg & Eric Njuki, 2022. "Information inputs and technical efficiency in midwest corn production: evidence from farmers' use of yield and soil maps," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 589-612, March.
    5. Qasim Ali & Sofia Anwar & Muhammad Sohail Amjad Makhdum & Muhammad Rizwan Yaseen, 2023. "Impact of Innovation on Productivity and Efficiency: Evidence from the Textile Industry of Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 5(1), pages 22-31.
    6. William C. Horrace & Hyunseok Jung & Shane Sanders, 2022. "Network Competition and Team Chemistry in the NBA," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 40(1), pages 35-49, January.

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