Fixed and Random Effects in Stochastic Frontier Models
AbstractReceived stochastic frontier analyses with panel data have relied on traditional fixed and random effects models. We propose extensions that circumvent two shortcomings of these approaches. The conventional panel data estimators assume that technical or cost inefficiency is time invariant. Second, the fixed and random effects estimators force any time invariant cross unit heterogeneity into the same term that is being used to capture the inefficiency. Inefficiency measures in these models may be picking up heterogeneity in addition to or even instead of inefficiency. A fixed effects model is extended to the stochastic frontier model using results that specifically employ the nonlinear specification. The random effects model is reformulated as a special case of the random parameters model. The techniques are illustrated in applications to the U.S. banking industry and a cross country comparison of the efficiency of health care delivery. Copyright Springer Science+Business Media, Inc. 2005
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 02-16.
Date of creation: 2002
Date of revision:
Contact details of provider:
Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
More information through EDIRC
Other versions of this item:
- Willam Greene, 2005. "Fixed and Random Effects in Stochastic Frontier Models," Journal of Productivity Analysis, Springer, vol. 23(1), pages 7-32, 01.
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.:
- William Greene, 2001.
"Fixed and Random Effects in Nonlinear Models,"
01-01, New York University, Leonard N. Stern School of Business, Department of Economics.
- Greene, W., 2001. "Fixed and Random Effects in Nonlinear Models," New York University, Leonard N. Stern School Finance Department Working Paper Seires 01-01, New York University, Leonard N. Stern School of Business-.
- Jeffrey M. Wooldridge, 2005.
"Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
- Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- William Greene, 2002. "The Behavior of the Fixed Effects Estimator in Nonlinear Models," Working Papers 02-05, New York University, Leonard N. Stern School of Business, Department of Economics.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Viveca Licata).
If references are entirely missing, you can add them using this form.