Heteroscedasticity and non-monotonic efficiency effects of a stochastic frontier model

Wang, Hung-Jen (2002): Heteroscedasticity and non-monotonic efficiency effects of a stochastic frontier model. Published in: Journal of Productivity Analysis , Vol. 3, No. 18 (2002): pp. 241-253.

Abstract

We consider a model that provides flexible parameterizations of the exogenous influences on inefficiency. In particular, we demonstrate the model's unique property of accommodating non-monotonic efficiency effect. With this non-monotonicity, production efficiency no longer increases or decreases monotonically with the exogenous influence; instead, the relationship can shifts within the sample. Our empirical example shows that variables can indeed have non-monotonic effects on efficiency. Furthermore, ignoring non-monotonicity is shown to yield an inferior estimation of the model, which sometimes results in opposite predictions concerning the data.

• Item Type: MPRA Paper
• Language: English
• Keywords: stochastic frontiers; heteroscedasticity; non-monotonic effects
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C24 - Truncated and Censored Models ; Switching Regression Models ; Threshold Regression Models; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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