Wang, Hung-Jen (2006): Stochastic frontier models. Published in: invited article for The New Palgrave Dictionary of Economics, 2nd edition, Palgrave Macmillan (2007)
Download (100Kb) | Preview
The stochastic frontier model was first proposed in the context of production function estimation to account for the effect of technical inefficiency. The inefficiency causes actual output to fall below the potential level (that is, the production frontier) and also raises production cost above the minimum level (that is, the cost frontier). Recent applications of the model are found in many fields of study including labour, finance, and economic growth. In these applications, the observed outcome (of wages, investment, and so on) is modelled as being deviating from a frontier level in one direction owing to factors such as information asymmetry.
|Item Type:||MPRA Paper|
|Original Title:||Stochastic frontier models|
|Keywords:||aftermarkets; allocative inefficiency; convergence; copulas; cost functions; duality; financing constraints; fixed-effect panel estimators; labour market search models; likelihood functions; nonparametric estimation; production function estimation; production functions; semiparametric estimation; stochastic cost frontiers; stochastic frontier models; technical inefficiency; technological catch-up; truncated distributions|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C24 - Truncated and Censored Models; Switching Regression Models
|Depositing User:||Hung-Jen Wang|
|Date Deposited:||25. May 2011 13:35|
|Last Modified:||17. Feb 2013 05:37|
Aigner, D., Lovell, C.A.K., and Schmidt, P. (1977). “Formulation and Estimation of Stochastic Frontier Production Function Models,” Journal of Econometrics 6, pp. 21- 37.
Battese, G.E., and Coelli, T.J. (1988). “Prediction of Firm-Level Technical Efficiencies with a Generalized Frontier Production Function and Panel Data,” Journal of Econometrics 38, pp. 387-99.
Greene, W.H. (1980). “On the Estimation of a Flexible Frontier Production Model,” Journal of Econometrics 13, pp. 101-15.
Hofler, R.A., and Murphy, K.J. (1992). “Underpaid and Overworked: Measuring the Effect of Imperfect Information on Wages,” Economic Inquiry 30, pp. 511-29.
Hunt-McCool, J., Koh, S.C., and Francis, B.B. (1996). “Testing for Deliberate Underpricing in the IPO Premarket: A Stochastic Frontier Approach,” Review of Financial Studies 9, pp. 1251-69.
Jondrow, J., Lovell, C.A.K., Materov, I.S., and Schmidt, P. (1982). “On the Estimation of Technical Inefficiency in the Stochastic Frontier Production Function Model,” Journal of Econometrics 19, pp. 233-38.
Kumbhakar, S.C. (1997). “Modeling Allocative Inefficiency in a Translog Cost Function and Cost Share Equations: An Exact Relationship,” Journal of Econometrics 76, pp. 351-56.
Kumbhakar, S.C., and Lovell, C.A.K. (2000). Stochastic Frontier Analysis. Cambridge [England] ; New York: Cambridge University Press.
Kumbhakar, S.C., and Tsionas, E.G. (2005) “The Joint Measurement of Technical and Allocative Inefficiencies: An Application of Bayesian Inference in Nonlinear Random- Effects Models,” Journal of American Statistical Association 100, pp. 736-47.
Kumbhakar, S.C., and Wang, H.-J. (2005a). “Estimation of Growth Convergence Using a Stochastic Production Frontier Approach,” Economics Letters, 3, pp. 300-305.
Kumbhakar, S.C., and Wang, H.-J. (2005b). “Estimation of Technical and Allocative Inefficiency: A Primal System Approach,” Journal of Econometrics, forthcoming.
Meeusen, W., and van den Broeck, J. (1977). “Technical Efficiency and Dimension of the Firm: Some Results on the Use of Frontier Production Functions,” Empirical Economics 2, pp. 109-22.
Schmidt, P., and Lin, T.F. (1984). “Simple Tests of Alternative Specifications in Stochastic Frontier Models,” Journal of Econometrics 24, pp. 349-61.
Schmidt, P., and Lovell, C.A.K. (1979). “Estimating Technical and Allocative Inefficiency Relative to Stochastic Production and Cost Frontiers,” Journal of Econometrics 9, pp. 343-366.
Schmidt, P., and Sickles, R.C. (1984). “Production Frontiers and Panel Data,” Journal of Business and Economic Statistics 2, pp. 367-74.
Wang, H.-J. (2003) “A Stochastic Frontier Analysis of Financing Constraints on Investment: The Case of Financial Liberalization in Taiwan,” Journal of Business and Economic Statistics 3, pp. 406-19.