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The Estimation of Different Technologies using a Latent Class Model

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  • del Corral, Julio
  • Álvarez, Antonio

Abstract

Since it is very likely that all the firms in a sample do not use the same technology it is necessary to consider several reference technologies. In order to control for this unobserved heterogeneity, we estimate these references using two alternative methods. The first one has two stages, where the sample is first split into groups by means of a cluster algorithm and then a technological reference is estimated for each group. The other method, a latent class model, is a single stage method. These two methods are compared with a traditional stochastic frontier which assumes that all firms use the same technology. In the empirical application we estimate a production function using data on Spanish dairy farms.

Suggested Citation

  • del Corral, Julio & Álvarez, Antonio, 2004. "The Estimation of Different Technologies using a Latent Class Model," Efficiency Series Papers 2004/07, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    • Handle: RePEc:oeg:wpaper:2004/07
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