IDEAS home Printed from https://ideas.repec.org/a/bla/agecon/v38y2008i1p99-108.html
   My bibliography  Save this article

Estimation of input-oriented technical efficiency using a nonhomogeneous stochastic production frontier model

Author

Listed:
  • Subal C. Kumbhakar
  • Efthymios G. Tsionas

Abstract

Technical inefficiency can be modeled as either input-oriented (IO) or output-oriented (OO). However, in the estimation of parametric stochastic production frontier models which use maximum likelihood method only the OO measure is used. In this article we consider a simple nonhomogeneous production function and estimate it with both IO and OO specifications. A sample of 80 Spanish dairy data (1993-1998) is used to estimate both models. We consider one output (liters of milk) and four variable inputs (viz., number of cows, kilograms of concentrates, hectares of land, and labor [measured in man-equivalent units]). We find that returns to scale (RTS) and technical efficiency results derived from these models are different because either estimated technologies are different, or they are evaluated at different points. Using a Monte Carlo analysis we show that if RTS is close to unity differences in the estimates of RTS and technical efficiency are smaller. This holds true for estimates of both RTS and technical efficiency. Copyright 2008 International Association of Agricultural Economists.

Suggested Citation

  • Subal C. Kumbhakar & Efthymios G. Tsionas, 2008. "Estimation of input-oriented technical efficiency using a nonhomogeneous stochastic production frontier model," Agricultural Economics, International Association of Agricultural Economists, vol. 38(1), pages 99-108, January.
  • Handle: RePEc:bla:agecon:v:38:y:2008:i:1:p:99-108
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1574-0862.2007.00285.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    2. Caudill, Steven B & Ford, Jon M & Gropper, Daniel M, 1995. "Frontier Estimation and Firm-Specific Inefficiency Measures in the Presence of Heteroscedasticity," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 105-111, January.
    3. Giannis Karagiannis & Peter Midmore & Vangelis Tzouvelekas, 2004. "Parametric Decomposition of Output Growth Using A Stochastic Input Distance Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1044-1057.
    4. Hung-jen Wang & Peter Schmidt, 2002. "One-Step and Two-Step Estimation of the Effects of Exogenous Variables on Technical Efficiency Levels," Journal of Productivity Analysis, Springer, vol. 18(2), pages 129-144, September.
    5. Caudill, Steven B. & Ford, Jon M., 1993. "Biases in frontier estimation due to heteroscedasticity," Economics Letters, Elsevier, vol. 41(1), pages 17-20.
    6. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
    7. A. N. Halter & H. O. Carter & J. G. Hocking, 1957. "A Note on the Transcendental Production Function y=cx1a1eb1x1x2a2eb2x2," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 39(4), pages 966-974.
    8. Álvarez, Antonio & Arias, Carlos & Kumbhakar, Subal, 2003. "Empirical Consequences of Direction Choice in Technical Efficiency Analysis," Efficiency Series Papers 2003/02, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    9. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    10. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Moawia, Alghalith, 2009. "Preferences estimation without approximation," MPRA Paper 19309, University Library of Munich, Germany.
    2. Moawia Alghalith, 2006. "Joint production and price uncertainty: hypothesis tests," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 49(3), pages 265-274.
    3. Alghalith, Moawia, 2010. "Preferences estimation without approximation," European Journal of Operational Research, Elsevier, vol. 207(2), pages 1144-1146, December.
    4. Bokusheva, Raushan & Kumbhakar, Subal C., 2014. "A Distance Function Model with Good and Bad Outputs," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182765, European Association of Agricultural Economists.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:agecon:v:38:y:2008:i:1:p:99-108. See general 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/iaaeeea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.