Inference in dynamic stochastic frontier models

Efthymios G. Tsionas
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Efthymios G. Tsionas: Department of Economics, Athens University of Economics and Business, 76 Patission Street, 104 34 Athens, Greece, Postal: Department of Economics, Athens University of Economics and Business, 76 Patission Street, 104 34 Athens, Greece

Journal of Applied Econometrics, 2006, vol. 21, issue 5, pages 669-676

Abstract: An important issue in models of technical efficiency measurement concerns the temporal behaviour of inefficiency. Consideration of dynamic models is necessary but inference in such models is complicated. In this paper we propose a stochastic frontier model that allows for technical inefficiency effects and dynamic technical inefficiency, and use Bayesian inference procedures organized around data augmentation techniques to provide inferences. Also provided are firm-specific efficiency measures. The new methods are applied to a panel of large US commercial banks over the period 1989-2000. Copyright © 2006 John Wiley & Sons, Ltd.

Date: 2006
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