Recent Developments in Stochastic Frontier Modeling

Some of the recent developments in the efficiency measurement area using stochastic frontier models are: A. Estimation of the IO model, B. Latent class models to examine technological heterogeneity as well as heterogeneity in economic behavior, C. Estimation of stochastic frontier models using LML, D. Non-constant parameters: Random coefficient models with and without inefficiency, Markov switching stochastic frontier models, E. Estimation of cost/profit system with technical and allocative inefficiency using alternative techniques. We consider these as "open problems". In the past, estimation of some of these models was considered to be too difficult. Advances have been made in recent years to estimate some of these so-called difficult models. In this paper we will focus on the first three of the above topics. There are some papers that deal with issues listed under D and E. Both Bayesian and classical approaches are used to address these issues.