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Technical efficiency in competing panel data models: A study of Norwegian grain farming

  • Kumbhakar, Subal C.
  • Lien, Gudbrand D.
  • Hardaker, J. Brian

Estimation of technical efficiency is widely used in empirical research using both cross-sectional and panel data. Although several stochastic frontier models for panel data are available, only a few of them are normally applied in empirical research. In this article we chose a broad selection of such models based on different assumptions and specifications of heterogeneity, heteroskedasticity and technical inefficiency. We applied these models to a single dataset from Norwegian grain farmers for the period 2004–2008. We also introduced a new model that disentangles firm effects from persistent (time-invariant) and residual (time-varying) technical inefficiency. We found that efficiency results are quite sensitive to how inefficiency is modeled and interpreted. Consequently, we recommend that future empirical research should pay more attention to modeling and interpreting inefficiency as well as to the assumptions underlying each model when using panel data. Copyright Springer Science+Business Media, LLC 2014

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File URL: http://purl.umn.edu/114673
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Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114673.

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Date of creation: 02 Sep 2011
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Handle: RePEc:ags:eaae11:114673
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  26. Kumbhakar, Subal C & Hjalmarsson, Lennart, 1995. "Labour-Use Efficiency in Swedish Social Insurance Offices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(1), pages 33-47, Jan.-Marc.
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