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Stochastic frontier models with multiple time-varying individual effects

  • Seung Ahn
  • Young Lee

    ()

  • Peter Schmidt

This paper proposes a flexible time-varying stochastic frontier model. Similarly to Lee and Schmidt [1993, In: Fried H, Lovell CAK, Schmidt S (eds) The measurement of productive efficiency: techniques and applications. Oxford University Press, Oxford], we assume that individual firms’ technical inefficiencies vary over time. However, the model, which we call the “multiple time-varying individual effects” model, is more general in that it allows multiple factors determining firm-specific time-varying technical inefficiencies. This allows the temporal pattern of inefficiency to vary over firms. The number of such factors can be consistently estimated. The model is applied to data on Indonesian rice farms, and the changes in the efficiency rankings of farms over time demonstrate the model’s flexibility. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11123-006-0020-8
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Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 27 (2007)
Issue (Month): 1 (February)
Pages: 1-12

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Handle: RePEc:kap:jproda:v:27:y:2007:i:1:p:1-12
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100296

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  1. Jushan Bai, 2003. "Inferential Theory for Factor Models of Large Dimensions," Econometrica, Econometric Society, vol. 71(1), pages 135-171, January.
  2. Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
  3. Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Econometric Society World Congress 2000 Contributed Papers 1504, Econometric Society.
  4. Peter Schmidt & Chirok Han & Luis Orea, 2004. "Estimation of a Panel Data Model with Parametric Temporal Variation in Individual Effects," Econometric Society 2004 Far Eastern Meetings 519, Econometric Society.
  5. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  6. Kumbhakar, Subal C., 1990. "Production frontiers, panel data, and time-varying technical inefficiency," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 201-211.
  7. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200.
  8. Sangho Kim & Young Hoon Lee, 2006. "The productivity debate of East Asia revisited: a stochastic frontier approach," Applied Economics, Taylor & Francis Journals, vol. 38(14), pages 1697-1706.
  9. Viliam Druska & William C. Horrace, 2004. "Generalized Moments Estimation for Spatial Panel Data: Indonesian Rice Farming," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 185-198.
  10. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
  11. Ahn, Seung Chan & Hoon Lee, Young & Schmidt, Peter, 2001. "GMM estimation of linear panel data models with time-varying individual effects," Journal of Econometrics, Elsevier, vol. 101(2), pages 219-255, April.
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