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Accounting for unobservables in production models:management and inefficiency

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Author Info
Antonio Álvarez () (University of Oviedo)
Carlos Arias () (University of León)
William Greene () (New York University)

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

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Find related papers by JEL classification:
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
D2 - Microeconomics - - Production and Organizations

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Antonio Alvarez & Carlos Arias, 2003. "Diseconomies of Size with Fixed Managerial Ability," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(1), pages 134-142, 02. [Downloadable!] (restricted)
  3. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, March. [Downloadable!]
  4. Efthymios G. Tsionas, 2002. "Stochastic frontier models with random coefficients," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(2), pages 127-147. [Downloadable!]
  5. 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. [Downloadable!] (restricted)
  6. 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.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Carlos Pestana Barros & Rui Cunha Marques, 2008. "Performance of European Airports: Regulation, Ownership and Managerial Efficiency," Working Papers 2008/25, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  2. Hockmann, H. & Pieniadz, A., 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. [Downloadable!]
  3. Mehdi Farsi & Massimo Filippini & William Greene, 2005. "Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies," Journal of Regulatory Economics, Springer, vol. 28(1), pages 69-90, 07. [Downloadable!] (restricted)
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