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Estimation of long-run inefficiency levels: a dynamic frontier approach

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  • Seung Ahn
  • Robin Sickles

Abstract

Cornwell, Schmidt, and Sickles (1990) and Kumbhakar (1990), among others, developed stochasticfrontier production models which allow firm specific inefficiency levels to change over time. These studies assumed arbitrary restrictions on the short-run dynamics of efficiency levels which have little theoretical justification. Further, the models are inappropriate for estimation of long-run efficiencies. We consider estimation of an alternative frontier model in which firmspecific technical inefficiency levels are autoregressive. This model is particularly useful to examine a potential dynamic link between technical innovations and production inefficiency levels. We apply our methodology to a panel of US airlines.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Econometric Reviews.

Volume (Year): 19 (2000)
Issue (Month): 4 ()
Pages: 461-492

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Handle: RePEc:taf:emetrv:v:19:y:2000:i:4:p:461-492

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Related research

Keywords: panel data; long-run inefficiency; frontier production function; generalized method of moments;

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Cited by:
  1. Efthymios G. Tsionas, 2006. "Inference in dynamic stochastic frontier models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 669-676.
  2. Huang, Tai-Hsin & Chen, Ying-Hsiu, 2009. "A study on long-run inefficiency levels of a panel dynamic cost frontier under the framework of forward-looking rational expectations," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 842-849, May.
  3. Koutsomanoli-Filippaki, Anastasia & Mamatzakis, Emmanuel C., 2010. "Estimating the speed of adjustment of European banking efficiency under a quadratic loss function," Economic Modelling, Elsevier, vol. 27(1), pages 1-11, January.
  4. Gardebroek, Cornelis & Oude Lansink, Alfons G.J.M., 2008. "Dynamic Microeconometric Approaches To Analysing Agricultural Policy," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6592, European Association of Agricultural Economists.
  5. Stefanou, Spiro E., 2009. "A Dynamic Characterization of Efficiency," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 10(1), January.
  6. Kutlu, Levent & Sickles, Robin C., 2012. "Estimation of market power in the presence of firm level inefficiencies," Journal of Econometrics, Elsevier, vol. 168(1), pages 141-155.
  7. Lambarraa, Fatima & Stefanou, Spiro E. & Gil, Jose Maria, 2009. "The analysis of irreversibility, uncertainty and dynamic technical inefficiency on the investment decision in Spanish olive sector," 2009 Conference, August 16-22, 2009, Beijing, China 51397, International Association of Agricultural Economists.
  8. Grigorios Emvalomatis, 2012. "Adjustment and unobserved heterogeneity in dynamic stochastic frontier models," Journal of Productivity Analysis, Springer, vol. 37(1), pages 7-16, February.
  9. Lambarraa, Fatima, 2012. "The Spanish Horticulture Sector: A dynamic efficiency analysis of Outdoor and Greenhouse farms," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126797, International Association of Agricultural Economists.

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