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Stochastic frontier models with correlated effects

Author

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  • Giannis Karagiannis

    (University of Macedonia)

  • Magnus Kellermann

    (The Bavarian State Research Center for Agriculture)

Abstract

In this paper we provide several new specifications within the true random effects model as well as stochastic frontiers models estimated with GLS and MLE that enrich modeling choices when distinguishing between heterogeneity and efficiency. The main feature of the proposed specifications is that they enlarge the set of heterogeneity covariates beyond that of Mundlak’s adjustment terms to include environmental factors that are not under the control of producers but affect the operation conditions of the production units. These environmental factors may be time varying or time invariant and not all may be correlated with heterogeneity.

Suggested Citation

  • Giannis Karagiannis & Magnus Kellermann, 2019. "Stochastic frontier models with correlated effects," Journal of Productivity Analysis, Springer, vol. 51(2), pages 175-187, June.
    • Handle: RePEc:kap:jproda:v:51:y:2019:i:2:d:10.1007_s11123-019-00551-y
    DOI: 10.1007/s11123-019-00551-y
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