Heteroscedasticity and non-monotonic efficiency effects of a stochastic frontier model
We consider a model that provides flexible parameterizations of the exogenous influences on inefficiency. In particular, we demonstrate the model's unique property of accommodating non-monotonic efficiency effect. With this non-monotonicity, production efficiency no longer increases or decreases monotonically with the exogenous influence; instead, the relationship can shifts within the sample. Our empirical example shows that variables can indeed have non-monotonic effects on efficiency. Furthermore, ignoring non-monotonicity is shown to yield an inferior estimation of the model, which sometimes results in opposite predictions concerning the data.
|Date of creation:||Apr 2002|
|Date of revision:|
|Publication status:||Published in Journal of Productivity Analysis 18.3(2002): pp. 241-253|
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