Neoclassical versus frontier production models? Testing for the skewness of regression residuals
AbstractThe empirical literature on production and cost functions is divided into two strands: 1) the neoclassical approach that concentrates on model parameters, 2) the frontier approach that decomposes the disturbance term to a symmetric noise term and a positively skewed inefficiency term. We propose a theoretical justification for the skewness of the inefficiency term, arguing that this skewness is the key testable hypothesis of the frontier approach. We propose to test the regression residuals for skewness to distinguish the two competing approaches. Our test builds directly upon the asymmetry of regression residuals and does not require any prior distributional assumptions.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 24208.
Date of creation: 2009
Date of revision:
Firms and production; Frontier estimation; Hypotheses testing; Production function; Productive efficiency analysis;
Other versions of this item:
- Timo Kuosmanen & Mogens Fosgerau, 2009. "Neoclassical versus Frontier Production Models? Testing for the Skewness of Regression Residuals," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 351-367, 06.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- A10 - General Economics and Teaching - - General Economics - - - General
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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