Measuring Productivity and Efficiency: A Kalman

Meryem Duygun, Levent Kutlu and Robin Sickles
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Meryem Duygun: University of Leicester

Working Papers from Rice University, Department of Economics

Abstract: In the Kalman Filter setting, one can model the inefficiency term of the standard stochastic frontier composed error as an unobserved state. In this study a panel data version of the local level model is used for estimating time-varying efficiencies of firms. We apply the Kalman filter to estimate average efficiencies of U.S. airlines and find that the technical efficiency of these carriers did not improve during the period 1999-2009. During this period the industry incurred substantial losses, and the efficiency gains from reorganized networks, code-sharing arrangements, and other best business practices apparently had already been realized.

JEL-codes: C13 C23 R49 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-eff
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