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Estimating efficiency effects in a stochastic frontier model with heteroskedastic errors

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  • Sriram Shankar

    (Monash University)

Abstract

In this paper, we introduce a stochastic frontier model that incorporates efficiency effects and a heteroskedastic error structure. The mean efficiency is specified by a logistic function of the effects variables and the distribution for the one-sided random variable representing inefficiency is left unspecified. In contrast to conventional efficiency effects models, our approach does not necessitate the use of the JLMS (Jondrow in J Econom 19:233–238, 1982) transformation for computing efficiency scores. Efficiency scores are derived directly from the estimated model parameters using feasible generalized non-linear least squares. In order to illustrate the practical applicability of our proposed model, we present an empirical example using OECD electricity generation data.

Suggested Citation

  • Sriram Shankar, 2025. "Estimating efficiency effects in a stochastic frontier model with heteroskedastic errors," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 14(1), pages 1-11, December.
    • Handle: RePEc:spr:jecstr:v:14:y:2025:i:1:d:10.1186_s40008-025-00353-6
    DOI: 10.1186/s40008-025-00353-6
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