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A Hierarchical Stochastic Frontier Model for Efficiency Measurement Under Technology Heterogeneity

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  • Ioannis Skevas

    (University College Cork)

Abstract

This article proposes an extension to the typical random-coefficients frontier model that allows the incorporation of firm management indicator(s) in the distribution of firms’ technology parameters. Such a modelling approach does not only relax the homogeneous technology assumption but also empirically tests for the factors that may be responsible for variation in firms’ technology parameters. The proposed approach is used to measure the technical efficiency of German dairy farms for the period 2001–2009. Estimation is performed using Bayesian techniques. The empirical findings suggest that German dairy farms achieve high levels of technical efficiency, while farms’ degree of intensification indeed drives several technology parameters. Furthermore, model comparison based on Bayes factors reveals that the employed model outperforms a simple stochastic frontier model and a random-coefficients stochastic frontier model.

Suggested Citation

  • Ioannis Skevas, 2019. "A Hierarchical Stochastic Frontier Model for Efficiency Measurement Under Technology Heterogeneity," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(3), pages 513-524, September.
    • Handle: RePEc:spr:jqecon:v:17:y:2019:i:3:d:10.1007_s40953-018-0144-5
    DOI: 10.1007/s40953-018-0144-5
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    Cited by:

    1. Jerzy Marzec & Andrzej Pisulewski, 2021. "Measurement of technical efficiency in the case of heterogeneity of technologies used between firms - Based on evidence from Polish crop farms," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(4), pages 152-161.
    2. Marta Arbelo-Pérez & Pilar Pérez-Gómez & Antonio Arbelo, 2023. "Profit efficiency and its determinants in the agricultural sector: A Bayesian approach," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(11), pages 436-445.
    3. Jerzy Marzec & Andrzej Pisulewski, 2020. "Pomiar efektywności zróżnicowanych technologicznie gospodarstw rolnych w Unii Europejskiej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 111-137.
    4. Ioannis Skevas, 2023. "A novel modeling framework for quantifying spatial spillovers on total factor productivity growth and its components," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(4), pages 1221-1247, August.
    5. Marta Arbelo-Pérez & Pilar Pérez-Gómez & Antonio Arbelo, . "Profit efficiency and its determinants in the agricultural sector: A Bayesian approach," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 0.

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    More about this item

    Keywords

    Technology heterogeneity; Dairy farms; Bayesian techniques; Technical efficiency; Intensification;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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