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Estimation of Technical Inefficiency in Production Frontier Models Using Cross-Sectional Data

Author

Listed:
  • KUMBHAKAR, SUBAL C.

    (State University of New York - Binghamton)

  • WANG, HUNG-JEN

    (National Taiwan University)

Abstract

In this paper we discuss the specification and estimation of technical efficiency in a variety of stochastic frontier production models. The focus is on cross-sectional models. We start from the basic neoclassical production theory and introduce technical inefficiency in there. Various model specifications with several distributional assumptions on the inefficiency component are explored in detail. Theoretical and empirical issues are illustrated with empirical examples using STATA.

Suggested Citation

  • Kumbhakar, Subal C. & Wang, Hung-Jen, 2010. "Estimation of Technical Inefficiency in Production Frontier Models Using Cross-Sectional Data," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 45(2), pages 7-77.
  • Handle: RePEc:dse:indecr:0023
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    More about this item

    Keywords

    Production Function; Stochastic Frontier; Input and Output-Oriented Technical Efficiency; Maximum Likelihood; Truncated Distributions.;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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