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Measuring productivity and efficiency: a Kalman filter approach

Author

Listed:
  • Meryem Duygun

    (University of Leicester
    University of Nottingham)

  • Levent Kutlu

    () (Antalya International University
    Georgia Institute of Technology)

  • Robin C. Sickles

    (Rice University)

Abstract

Abstract In the Kalman filter setting, one can model the inefficiency term of the standard stochastic frontier composed error as an unobserved state. In this study a panel data version of the local level model is used for estimating time-varying efficiencies of firms. We apply the Kalman filter to estimate average efficiencies of U.S. airlines and find that the technical efficiency of these carriers did not improve during the period 1999–2009. During this period the industry incurred substantial losses, and the efficiency gains from reorganized networks, code-sharing arrangements, and other best business practices apparently had already been realized.

Suggested Citation

  • Meryem Duygun & Levent Kutlu & Robin C. Sickles, 2016. "Measuring productivity and efficiency: a Kalman filter approach," Journal of Productivity Analysis, Springer, vol. 46(2), pages 155-167, December.
  • Handle: RePEc:kap:jproda:v:46:y:2016:i:2:d:10.1007_s11123-016-0477-z DOI: 10.1007/s11123-016-0477-z
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    References listed on IDEAS

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    Cited by:

    1. repec:spr:empeco:v:53:y:2017:i:1:d:10.1007_s00181-017-1251-4 is not listed on IDEAS
    2. Kutlu, Levent, 2017. "A constrained state space approach for estimating firm efficiency," Economics Letters, Elsevier, vol. 152(C), pages 54-56.

    More about this item

    Keywords

    Kalman filter; Panel data; Airline productivity;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R49 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Other

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