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A note on the likelihood ratio test on the equality of group frontiers

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  • Huang, Cliff J.
  • Lai, Hung-pin

Abstract

The empirical applications of the metafrontier analysis have largely been popularized by the publications of Battese et al. (2004), and O’Donnell et al. (2008). Prior to the estimation of the metafrontier function, it is generally suggested to conduct a likelihood-ratio (LR) test to test if all group frontiers are the same. In this short note, we point out that although the null hypothesis of the suggested LR test restricts all frontiers to be the same for all groups, the heterogeneity in the error distribution may exist and should be considered. We propose a restricted LR test as an alternative procedure.

Suggested Citation

  • Huang, Cliff J. & Lai, Hung-pin, 2017. "A note on the likelihood ratio test on the equality of group frontiers," Economics Letters, Elsevier, vol. 155(C), pages 5-8.
    • Handle: RePEc:eee:ecolet:v:155:y:2017:i:c:p:5-8
    DOI: 10.1016/j.econlet.2017.02.037
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    References listed on IDEAS

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    1. Christopher O’Donnell & D. Rao & George Battese, 2008. "Metafrontier frameworks for the study of firm-level efficiencies and technology ratios," Empirical Economics, Springer, vol. 34(2), pages 231-255, March.
    2. George Battese & D. Rao & Christopher O'Donnell, 2004. "A Metafrontier Production Function for Estimation of Technical Efficiencies and Technology Gaps for Firms Operating Under Different Technologies," Journal of Productivity Analysis, Springer, vol. 21(1), pages 91-103, January.
    3. K.M Earfan Ali & Q.A Samad, 2013. "A Metafrontier Production Function for Estimation of Technical Efficiencies of Wheat Farmers under Different Technologies," Journal of Asian Scientific Research, Asian Economic and Social Society, vol. 3(9), pages 933-944.
    4. K.M. Earfan Ali & Q.A. Samad, 2013. "A Metafrontier Production Function for Estimation of Technical Efficiencies of Wheat Farmers under Different Technologies," Journal of Asian Scientific Research, Asian Economic and Social Society, vol. 3(9), pages 933-944, September.
    5. Huang, Tai-Hsin & Chiang, Dien-Lin & Tsai, Chao-Min, 2015. "Applying the New Metafrontier Directional Distance Function to Compare Banking Efficiencies in Central and Eastern European Countries," Economic Modelling, Elsevier, vol. 44(C), pages 188-199.
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