Misspecification Preferred: The Sensitivity of Inefficiency Rankings

Uwe Jensen ()

Journal of Productivity Analysis, 2005, vol. 23, issue 2, 223-244

Abstract: Ruggiero (European Journal of Operational Research 115, 555–563. 1999) compared the two popular parametric frontier methods for cross-sectional data—the stochastic frontier and the corrected OLS—in a simulation study. He demonstrated that the inefficiency ranking accuracy of the established stochastic frontier is uniformly inferior to that of the misspecified Corrected OLS (COLS) (which lacks an error term). The reason for his result remains unclear, however. In this paper, a more extensive simulation study is therefore conducted to find out whether the superiority of COLS is simply due to small sample sizes or to poor performance of the inefficiency level estimator. Copyright Springer Science+Business Media, Inc. 2005

Keywords: inefficiency rankings; misspecification; parametric frontiers; sensitivity; simulation (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (15)

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DOI: 10.1007/s11123-005-1330-y

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