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A Recursive Thick Frontier Approach To Estimating Production Efficiency

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We introduce a new panel data estimation technique for cost and production functions: the Recursive Thick Frontier Approach (RTFA). RTFA has two advantages over existing thick frontier methods. First, technical inefficiency is allowed to be dependent on the explanatory variables of the frontier model. Secondly, no distributional assumptions are imposed on the inefficiency component of the error term. We show by means of simulation experiments that RTFA can outperform the popular stochastic frontier approach (SFA) and the “within” OLS estimator for realistic parameterisations of the productivity model.

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  • Rien Wagenvoort & Paul Schure, 2005. "A Recursive Thick Frontier Approach To Estimating Production Efficiency," Econometrics Working Papers 0503, Department of Economics, University of Victoria.
  • Handle: RePEc:vic:vicewp:0503
    Note: ISSN 1485-6441
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    Cited by:

    1. Jorge David Quinteo Otero & William Orlando Prieto Bustos & Fernando Barrios Aguirre & Laura Elena Leviller Guardo, 2008. "Determinantes de la eficiencia técnica en las empresas colombianas, 2001-2004," Revista Semestre Económico, Universidad de Medellín, November.
    2. Rojas, Mariano, 2012. "Do People in Income Poverty Use Their Income Efficiently? A Subjective Well-Being Approach," WIDER Working Paper Series 110, World Institute for Development Economic Research (UNU-WIDER).
    3. Mariano Rojas, 2012. "Do People in Income Poverty Use Their Income Efficiently?: a Subjective Well-Being Approach," WIDER Working Paper Series wp-2012-110, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    Technical Efficiency; Efficiency Measurement; Frontier Production Functions; Recursive Thick Frontier Approach;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • D2 - Microeconomics - - Production and Organizations

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