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Estimation of long-run inefficiency levels: a dynamic frontier approach

Author

Listed:
  • Seung Ahn
  • Robin Sickles

Abstract

Cornwell, Schmidt, and Sickles (1990) and Kumbhakar (1990), among others, developed stochasticfrontier production models which allow firm specific inefficiency levels to change over time. These studies assumed arbitrary restrictions on the short-run dynamics of efficiency levels which have little theoretical justification. Further, the models are inappropriate for estimation of long-run efficiencies. We consider estimation of an alternative frontier model in which firmspecific technical inefficiency levels are autoregressive. This model is particularly useful to examine a potential dynamic link between technical innovations and production inefficiency levels. We apply our methodology to a panel of US airlines.

Suggested Citation

  • Seung Ahn & Robin Sickles, 2000. "Estimation of long-run inefficiency levels: a dynamic frontier approach," Econometric Reviews, Taylor & Francis Journals, vol. 19(4), pages 461-492.
  • Handle: RePEc:taf:emetrv:v:19:y:2000:i:4:p:461-492
    DOI: 10.1080/07474930008800482
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