Estimating State-Contingent Production Frontiers
Chambers and Quiggin (2000) advocate the use of state-contingent production technologies to represent risky production and establish important theoretical results concerning producer behaviour under uncertainty. Unfortunately, perceived problems in the estimation of state-contingent models have limited the usefulness of the approach in policy formulation. We show that fixed and random effects state-contingent production frontiers can be conveniently estimated in a finite mixtures framework. An empirical example is provided. Compared to standard estimation approaches, we find that estimating production frontiers in a state-contingent framework produces significantly different estimates of elasticities, firm technical efficiencies and other quantities of economic interest.
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"Separation and Hedging Results with State-Contingent Production,"
London School of Economics and Political Science, vol. 64(254), pages 187-209, May.
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Australian Journal of Agricultural and Resource Economics,
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- Chambers, Robert G. & Quiggin, John C., 2004. "Technological and financial approaches to risk management in agriculture: an integrate approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), June.
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"Posterior Analysis of Stochastic Frontier Models using Gibbs Sampling,"
CORE Discussion Papers
1994061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Osiewalski, Jacek & Steel, Mark F.J. & Koop, Gary, 1992. "Posterior analysis of stochastic frontier models using Gibbs sampling," DES - Working Papers. Statistics and Econometrics. WS 3677, Universidad Carlos III de Madrid. Departamento de Estadística.
- Robert G. Chambers & John Quiggin, 2002. "The State-Contingent Properties of Stochastic Production Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 513-526.
- Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
- Chambers, Robert G. & Quiggin, John, 1996. "Non-point-source pollution regulation as a multi-task principal-agent problem," Journal of Public Economics, Elsevier, vol. 59(1), pages 95-116, January.
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