Measuring technical efficiency in the stochastic varying coefficient frontier model

Giannis Karagiannis and Vangelis Tzouvelekas

Agricultural Economics, 2009, vol. 40, issue 4, 389-396

Abstract: Due to the assumption that the best practice methods refer to each input separately instead of the whole set of inputs used by a firm, the benchmark technology as defined in the stochastic varying coefficient frontier model may be infeasible and theoretically improper whenever the maximum response coefficients are not coming from the same production unit. To overcome this problem, we propose alternative measures of output‐oriented and single‐factor technical efficiencies inspired from the maximum likelihood formulation of the nonneutral frontier model. The empirical results indicate that there are significant differences between the two in terms of the estimated efficiency scores but not significant differences we detected in terms of the efficiency ranking.

Date: 2009
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https://doi.org/10.1111/j.1574-0862.2009.00386.x

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Working Paper: Measuring Technical Efficiency in the Stochastic Varying Coefficient Frontier Model (2007)
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