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A Flexible Time-Varying Specification of the Technical Inefficiency Effects Model

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  • Giannis Karagiannis

    ()
    (Department of Economics, University of Macedonia, Greece)

  • Vangelis Tzouvelekas

    ()
    (Department of Economics, University of Crete, Greece)

Abstract

The temporal pattern of technical efficiency in the technical inefficiency effects model, as initially modeled by Battese and Coelli (1995), is rather restrictive. Specifically, it a priori imposes a common pattern upon all firms in the sample, which in addition is monotonic over time. Obviously this is an undesirable implication of the model especially when there is evidence of strong firm heterogeneity and/or a long time span. To overcome this shortcoming, the present paper incorporates the Cornwell, Sickless and Schmidt (1990) flexible specification of the temporal pattern of technical efficiency into technical inefficiency effects model. The proposed formulation is then applied to the agricultural sector of the EU and US, during the period 1973-1993. The empirical result support the proposed formulation as quite different temporal patterns of technical efficiency have been found for the ten countries included in the analysis.

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Bibliographic Info

Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0517.

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Length: 15 pages
Date of creation: 00 2005
Date of revision:
Handle: RePEc:crt:wpaper:0517

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  1. V. Ball & Jean-Christophe Bureau & Jean-Pierre Butault & Richard Nehring, 2001. "Levels of Farm Sector Productivity: An International Comparison," Journal of Productivity Analysis, Springer, vol. 15(1), pages 5-29, January.
  2. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
  3. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200.
  4. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  5. Kumbhakar, Subal C. & Heshmati, Almas & Hjalmarsson, Lennart, 1997. "Temporal patterns of technical efficiency: Results from competing models," International Journal of Industrial Organization, Elsevier, vol. 15(5), pages 597-616, August.
  6. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
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Cited by:
  1. Zhu, Xueqin & Karagiannis, Giannis & Oude Lansink, Alfons G.J.M., 2008. "Analyzing the impact of direct subsidies on the performance of the Greek Olive Farms with a non-monotonic efficiency effects model," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43612, European Association of Agricultural Economists.

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