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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 & 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. 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.
  2. Aditi Bhattacharyya, 2012. "Adjustment of inputs and measurement of technical efficiency: A dynamic panel data analysis of the Egyptian manufacturing sectors," Empirical Economics, Springer, vol. 42(3), pages 863-880, June.
  3. 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.
  4. Jorge E. Galán & Helena Veiga & Michael P. Wiper, 2013. "Bayesian analysis of dynamic effects in inefficiency : evidence from the Colombian banking sector," Statistics and Econometrics Working Papers ws131918, Universidad Carlos III, Departamento de Estadística y Econometría.
  5. Sickles, Robin C., 2005. "Panel estimators and the identification of firm-specific efficiency levels in parametric, semiparametric and nonparametric settings," Journal of Econometrics, Elsevier, vol. 126(2), pages 305-334, June.
  6. Grigorios Emvalomatis, 2012. "Adjustment and unobserved heterogeneity in dynamic stochastic frontier models," Journal of Productivity Analysis, Springer, vol. 37(1), pages 7-16, February.
  7. 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.
  8. Massimo Filippini & Elisa Tosetti, 2014. "Stochastic Frontier Models for Long Panel Data Sets: Measurement of the Underlying Energy Efficiency for the OECD Countries," CER-ETH Economics working paper series 14/198, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  9. 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.
  10. Massimo Filippini & William Greene, 2014. "Persistent and Transient Productive Inefficiency: A Maximum Simulated Likelihood Approach," CER-ETH Economics working paper series 14/197, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  11. Stefanou, Spiro E., 2009. "A Dynamic Characterization of Efficiency," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 10(1), January.
  12. 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.
  13. 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.
  14. Efthymios G. Tsionas, 2006. "Inference in dynamic stochastic frontier models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 669-676.

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