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Modeling the effect of competition using robust conditional nonparametric frontiers: Evidence from U.S. manufacturing sector

Polemis, Michael and Stengos, Thanasis and Tzeremes, Nickolaos (2018): Modeling the effect of competition using robust conditional nonparametric frontiers: Evidence from U.S. manufacturing sector.

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Abstract

The study applies the probabilistic framework of nonparametric frontier estimation in order to model the effect of competitive conditions on sectors’ production efficiency levels. We utilize conditional Order-m robust frontiers modeling the dynamic effects of competitive conditions on a sample of 462 U.S. 6-digit manufacturing sectors over the period 1958-2009. The results derived from the time-dependent robust conditional estimators unveil a non-linear relationship between market competition and productive efficiency. Our findings suggest that for higher competitive conditions the effect is positive up to a certain threshold point after which the effect becomes negative.

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