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Measuring Productivity and Efficiency: A Kalman

Author

Listed:
  • Duygun, Meryem

    (University of Leicester)

  • Kutlu, Levent

    (GA Institute of Technology)

  • Sickles, Robin C.

    (Rice University)

Abstract

In the Kalman Filter setting, one can model the inefficiency term of the standard stochastic frontier composed error as an unobserved state. In this study a panel data version of the local level model is used for estimating time-varying efficiencies of firms. We apply the Kalman filter to estimate average efficiencies of U.S. airlines and find that the technical efficiency of these carriers did not improve during the period 1999-2009. During this period the industry incurred substantial losses, and the efficiency gains from reorganized networks, code-sharing arrangements, and other best business practices apparently had already been realized.

Suggested Citation

  • Duygun, Meryem & Kutlu, Levent & Sickles, Robin C., 2014. "Measuring Productivity and Efficiency: A Kalman," Working Papers 15-010, Rice University, Department of Economics.
    • Handle: RePEc:ecl:riceco:15-010
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    References listed on IDEAS

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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R49 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Other

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