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A Stochastic Frontier Model with an Effect Stochastic Frontier Models with Endogenous Selection

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Abstract

Government policies are frequently used throughout the world to promote productivity. Some of the policies are designed to enhance production technology, and others are meant to improve production efficiency. In addition, another issue to consider in designing and evaluating policies is whether a mediator is required/effective in achieving the final outcome. To better understand and evaluate the policies, we propose a new stochastic frontier model with a treatment status and a mediator, both of which are allowed to be endogenous. The model allows us to decompose the total program (treatment) effect into the technology and efficiency components, and it also allows us to investigate whether the effect takes place directly from the program or indirectly through a particular mediator. We illustrate the empirical application of the model using data for India to study the effects of large dams on the local districts’ agricultural production.

Suggested Citation

  • Yi-Ting Chen & Yu-Chin Hsu & Hung-Jen Wang, 2014. "A Stochastic Frontier Model with an Effect Stochastic Frontier Models with Endogenous Selection," IEAS Working Paper : academic research 14-A006, Institute of Economics, Academia Sinica, Taipei, Taiwan, revised Sep 2015.
  • Handle: RePEc:sin:wpaper:14-a006
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    More about this item

    Keywords

    stochastic frontier models; treatment effect; mediation analysis;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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