A Dynamic Stochastic Frontier Production Model with Time-Varying Efficiency
AbstractIn this paper we introduce technical efficiency via the intercept that evolve over time as a AR(1) process in a stochastic frontier (SF) framework in a panel data framework. Following are the distinguishing features of the model. First, the model is dynamic in nature. Second, it can separate technical inefficiency from fixed firm-specific effects which are not part of inefficiency. Third, the model allows one to estimate technical change separate from change in technical efficiency. We propose the ML method to estimate the parameters of the model. Finally, we derive expressions to calculate/predict technical inefficiency (efficiency).
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2003-15.
Length: 11 pages
Date of creation: Sep 2002
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Other versions of this item:
- Evangelia Desli & Subhash Ray & Subal Kumbhakar, 2003. "A dynamic stochastic frontier production model with time-varying efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 10(10), pages 623-626.
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-05-29 (All new papers)
- NEP-ECM-2003-05-29 (Econometrics)
- NEP-EFF-2003-07-29 (Efficiency & Productivity)
- NEP-INO-2003-05-29 (Innovation)
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