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Accounting for unobservables in production models:management and inefficiency

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Abstract

This paper explores the role of unobserved managerial ability in production and its relationship with technical efficiency. Previous analyses of managerial ability have been based on strong assumptions about its role in production or on the use of proxies. We avoid these limitations by introducing managerial ability as an unobserved random variable in a translog production function. The resulting empirical model can be estimated as a stochastic production frontier with random coefficients.

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File URL: http://public.centrodeestudiosandaluces.es/pdfs/E200472.pdf
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Bibliographic Info

Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/72.

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Length: 27 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:cea:doctra:e2004_72

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Keywords: Managerial ability; technical efficiency; production frontier; random coefficients model; maximum simulated likelihood.;

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References

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  1. Tsionas, E.G., 2001. "Stochastic Frontier Models with Random Coefficients," Athens University of Economics and Business 130, Athens University of Economics and Business, Department of International and European Economic Studies.
  2. Antonio Alvarez & Carlos Arias, 2003. "Diseconomies of Size with Fixed Managerial Ability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 134-142.
  3. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
  4. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  5. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
  6. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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Cited by:
  1. Mehdi Farsi & Massimo Filippini, 2005. "A Benchmarking Analysis of Electricity Distribution Utilities in Switzerland," CEPE Working paper series 05-43, CEPE Center for Energy Policy and Economics, ETH Zurich.
  2. Pestana Barros, Carlos & Sequeira Antunes, Olinda, 2011. "Performance assessment of Portuguese wind farms: Ownership and managerial efficiency," Energy Policy, Elsevier, vol. 39(6), pages 3055-3063, June.
  3. Astrid Cullmann & Mehdi Farsi & Massimo Filippini, 2009. "Unobserved Heterogeneity and International Benchmarking in Public Transport," Discussion Papers of DIW Berlin 960, DIW Berlin, German Institute for Economic Research.
  4. Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2007. "Benchmarking and Regulation in the Electricity Distribution Sector," CEPE Working paper series 07-54, CEPE Center for Energy Policy and Economics, ETH Zurich.
  5. Farsi, Mehdi & Filippini, Massimo, 2009. "An analysis of cost efficiency in Swiss multi-utilities," Energy Economics, Elsevier, vol. 31(2), pages 306-315, March.
  6. repec:ise:isegwp:wp252008 is not listed on IDEAS
  7. Arazmuradov, Annageldy & Martini, Gianmaria & Scotti, Davide, 2014. "Determinants of total factor productivity in former Soviet Union economies: A stochastic frontier approach," Economic Systems, Elsevier, vol. 38(1), pages 115-135.
  8. Hockmann, Heinrich & Pieniadz, Agata, 2008. "Farm Heterogeneity and Efficiency in Polish Agriculture: A Stochastic Frontier Analysis," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44278, European Association of Agricultural Economists.
  9. Mehdi Farsi & Massimo Filippini & William Greene, 2005. "Application of Panel Data Models in Benchmarking Analysis of the Electrivity Distribution Sector," CEPE Working paper series 05-39, CEPE Center for Energy Policy and Economics, ETH Zurich.
  10. Thomas Triebs & Subal C. Kumbhakar, 2012. "Management Practice in Production," Ifo Working Paper Series Ifo Working Paper No. 129, Ifo Institute for Economic Research at the University of Munich.
  11. Mehdi Farsi & Massimo Filippini & William Greene, 2004. "Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies," CEPE Working paper series 04-32, CEPE Center for Energy Policy and Economics, ETH Zurich.
  12. William Greene & Colin McKenzie, 2012. "LM Tests for Random Effects," Working Papers 12-14, New York University, Leonard N. Stern School of Business, Department of Economics.
  13. Andrea Brasili & Loredana Federico, 2008. "Recent Developments in Productivity and the Role of Entrepreneurship in Italy: An Industry View," Rivista di Politica Economica, SIPI Spa, vol. 98(2), pages 179-214, March-Apr.
  14. Wang, Xiaobing & Hockmann, Heinrich, 2012. "Technical Efficiency Under Producer’S Individual Technology: A Metafrontier Analysis," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126755, International Association of Agricultural Economists.
  15. Maria del Pilar Baquero Forero & Toshifumi Kuroda & Takanori Ida, 2010. "Cultural determinants of countries management efficiency:A random coefficients stochastic frontier approach," Discussion papers e-10-012, Graduate School of Economics Project Center, Kyoto University.

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