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Estimation and efficiency evaluation of stochastic frontier models with interval dependent variables

Author

Listed:
  • Shih-Tang Hwu

    (California State Polytechnic University)

  • Tsu-Tan Fu

    (Soochow University)

  • Wen-Jen Tsay

    (Academia Sinica)

Abstract

This paper considers the maximum likelihood estimation of a stochastic frontier production function with an interval outcome. We derive an analytical formula for calculating the likelihood function of interval stochastic frontier models. Monte Carlo experiments reveal that the finite sample performance of our method is promising even when the sample size is relatively moderate. We also provide an exact formula for evaluating technical efficiency with interval outcome and apply our method to measure information inefficiency in the labor market for newly graduated college students in Taiwan.

Suggested Citation

  • Shih-Tang Hwu & Tsu-Tan Fu & Wen-Jen Tsay, 2021. "Estimation and efficiency evaluation of stochastic frontier models with interval dependent variables," Journal of Productivity Analysis, Springer, vol. 56(1), pages 33-44, August.
    • Handle: RePEc:kap:jproda:v:56:y:2021:i:1:d:10.1007_s11123-021-00609-w
    DOI: 10.1007/s11123-021-00609-w
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    References listed on IDEAS

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