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Bayesian inference in threshold stochastic frontier models

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  • Tsionas, Efthymios G.
  • Tran, Kien C.
  • Michaelides, Panayotis G.

Abstract

In this paper, we generalize the stochastic frontier model to allow for heterogeneous technologies and inefficiencies in a structured way that allows for learning and adapting. We propose a general model and various special cases, organized around the idea that there is switching or transition from one technology to the other(s), and construct threshold stochastic frontier models. We suggest Bayesian inferences for the general model proposed here and its special cases using Gibbs sampling with data augmentation. The new techniques are applied, with very satisfactory results, to a panel of world production functions using, as switching or transition variables, human capital, age of capital stock (representing input quality), as well as a time trend to capture structural switching

Suggested Citation

  • Tsionas, Efthymios G. & Tran, Kien C. & Michaelides, Panayotis G., 2017. "Bayesian inference in threshold stochastic frontier models," LSE Research Online Documents on Economics 86848, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:86848
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    References listed on IDEAS

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    1. Hung-pin Lai, 2013. "Estimation of the threshold stochastic frontier model in the presence of an endogenous sample split variable," Journal of Productivity Analysis, Springer, vol. 40(2), pages 227-237, October.
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    Cited by:

    1. Guarini, Giulio & Laureti, Tiziana & Garofalo, Giuseppe, 2020. "Socio-institutional determinants of educational resource efficiency according to the capability approach: An endogenous stochastic frontier analysis," Socio-Economic Planning Sciences, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    Stochastic frontier Regime switching Efficiency measurement Bayesian inference Markov Chain Monte Carlo;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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