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Inference in stochastic frontier analysis with dependent error terms

Listed author(s):
  • El Mehdi, Rachida
  • Hafner, Christian M.

Stochastic frontier analysis (SFA) is often used to estimate technical efficiency of entities such as firms, countries or municipalities. A potential dependence between the two components of the error term can be taken into account by a copula function. While estimation of the model is straightforward using the Corrected Ordinary Least Squares (COLS) and Maximum Likelihood (ML) methods, an open issue concerns the inference of the technical efficiencies. We propose a parametric bootstrap algorithm which is suitable for the dependence case. This allows us to estimate the efficiency percentile confidence intervals. We apply the model to the estimation of technical efficiencies of moroccan municipalities.

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File URL: http://www.sciencedirect.com/science/article/pii/S0378475413002310
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Article provided by Elsevier in its journal Mathematics and Computers in Simulation (MATCOM).

Volume (Year): 102 (2014)
Issue (Month): C ()
Pages: 104-116

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Handle: RePEc:eee:matcom:v:102:y:2014:i:c:p:104-116
DOI: 10.1016/j.matcom.2013.09.008
Contact details of provider: Web page: http://www.journals.elsevier.com/mathematics-and-computers-in-simulation/

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  1. Greene, William H., 1980. "Maximum likelihood estimation of econometric frontier functions," Journal of Econometrics, Elsevier, vol. 13(1), pages 27-56, May.
  2. Christian Ritter & Léopold Simar, 1997. "Pitfalls of Normal-Gamma Stochastic Frontier Models," Journal of Productivity Analysis, Springer, vol. 8(2), pages 167-182, May.
  3. Murray D. Smith, 2008. "Stochastic frontier models with dependent error components," Econometrics Journal, Royal Economic Society, vol. 11(1), pages 172-192, March.
  4. 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.
  5. Greene, William H., 1980. "On the estimation of a flexible frontier production model," Journal of Econometrics, Elsevier, vol. 13(1), pages 101-115, May.
  6. 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.
  7. William Greene, 2010. "A stochastic frontier model with correction for sample selection," Journal of Productivity Analysis, Springer, vol. 34(1), pages 15-24, August.
  8. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
  9. Leopold Simar & Paul Wilson, 2010. "Inferences from Cross-Sectional, Stochastic Frontier Models," Econometric Reviews, Taylor & Francis Journals, vol. 29(1), pages 62-98.
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