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Estimation of Input-Specific Technical and Allocative Inefficiency in Stochastic Frontier Models

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  • Kumbhakar, Subal C

Abstract

This paper considers an extension of technical inefficiency to a mor e disaggregate level, viz., input-specific technical inefficiency, based on a stochastic production frontier. Allocative inefficiency is modeled as a departure from the first order conditions for cost mini mization. The production function and the first order conditions for cost minimization, derived from a Cobb-Douglas technology, form the basis of the likelihood function to obtain the maximum likelihood estimates. Panel data on U.S. Class 1 railroads are used to estimate technical inefficiency specific to labor and fuel for each road. Cost of allocative inefficiencies are also calculated for the individual roads. Copyright 1988 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 40 (1988)
Issue (Month): 3 (September)
Pages: 535-49

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Handle: RePEc:oup:oxecpp:v:40:y:1988:i:3:p:535-49

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Cited by:
  1. Andre Croppenstedt & Mulat Demeke, 1997. "An empirical study of cereal crop production and technical efficiency of private farmers in Ethiopia: a mixed fixed-random coefficients approach," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1217-1226.
  2. Allen N. Berger & David B. Humphrey, 1997. "Efficiency of financial institutions: international survey and directions for future research," Finance and Economics Discussion Series 1997-11, Board of Governors of the Federal Reserve System (U.S.).
  3. Chaffai, Mohamed E., 1997. "Estimating input-specific technical inefficiency: The case of the Tunisian banking industry," European Journal of Operational Research, Elsevier, vol. 98(2), pages 314-331, April.
  4. Nguyen, Khac Minh & Giang, Thanh Long, 2005. "Efficiency of Construction Firms in Vietnam," MPRA Paper 968, University Library of Munich, Germany, revised Nov 2006.

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