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The Use of Panel Quantile Regression for Efficiency Measurement: Insights from Monte Carlo Simulations

Author

Listed:
  • Audrey Laporte
  • Adrian Rohit Dass

Abstract

In panel stochastic frontier models, the Fixed Effects (FE) approach produces biased technical efficiency scores when time-invariant variables are important in the production process, and the Random Effects (RE) approach imposes distributional assumptions about the inefficiency. Moreover, technical efficiency scores obtained from these models are biased when the sample contains a large number of firms near the efficient frontier. We propose the use of quantile regression (QR) with a Correlated Random Effects (CRE) specification as an alternative to these approaches. Using Monte Carlo simulations, we show that CRE QR can overcome the limitations of FE and RE stochastic frontier models.

Suggested Citation

  • Audrey Laporte & Adrian Rohit Dass, 2016. "The Use of Panel Quantile Regression for Efficiency Measurement: Insights from Monte Carlo Simulations," Working Papers 160005, Canadian Centre for Health Economics.
    • Handle: RePEc:cch:wpaper:160005
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    File URL: http://www.canadiancentreforhealtheconomics.ca/wp-content/uploads/2016/04/LaporteRohit-Dass_2016.pdf
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    Citations

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    Cited by:

    1. Juan Cabas Monje & Bouali Guesmi & Amer Ait Sidhoum & José María Gil, 2023. "Measuring technical efficiency of Spanish pig farming: Quantile stochastic frontier approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(4), pages 688-703, October.
    2. Berner, Anne & Lange, Steffen & Silbersdorff, Alexander, 2022. "Firm-level energy rebound effects and relative efficiency in the German manufacturing sector," Energy Economics, Elsevier, vol. 109(C).
    3. Monje, Juan Cabas & Sidhoum, Amer Ait & Gil, Jose M., 2021. "Investigating Technical Efficiency of Spanish Pig Farming: A Quantile Regression Approach," 2021 Conference, August 17-31, 2021, Virtual 315196, International Association of Agricultural Economists.

    More about this item

    Keywords

    technical efficiency; quantile regression; panel data; stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D2 - Microeconomics - - Production and Organizations

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